We study how securities and issuance mechanisms can be designed to mitigate the adverse impact of market imperfections on liquidity. In our model, asset owners seek to obtain liquidity by selling claims contingent on privately observed future cash-flows. Liquidity suppliers can be competitive or strategic. In the optimal trading mechanism associated to an arbitrary given security, issuers with ...

This paper studies the effects of corporate cash holdings on firm pricing strategy. Focusing on the airline industry to identify markets and rivalry, and utilizing the Aviation Investment and Reform Act of the 21 Century (AIR-21) as a quasi-natural experiment to identify exogenous increases in market-level competition, I test the effect of ex-ante relative-to-rival cash holdings on ex-post chan...

We model the interplay between cash and debt policies in the presence of financial constraints. While saving cash allows constrained firms to hedge against future cash flow shortfalls, reducing current debt – “saving borrowing capacity” – is a more effective way of securing investment in high cash flow states. This trade-off implies that constrained firms will allocate cash flows into cash hold...

This paper empirically examines whether additional future fixed capital and R&D investment expenditures induce firms to accumulate cash reserves while considering the role of market imperfections. Implementing a dynamic framework on a panel of US, UK and German companies, we find that firms make larger additions to cash holdings when they plan additional future R&D rather than fixed capital inv...

Purpose This paper aims to study the impact of human resource heterogeneity on firms’ cash-holding policies. Design/methodology/approach The authors construct a proxy for using dissimilarity in employees’ skill structure between firm and its peers same industry. Findings report evidence that firms with heterogeneous resources hold more cash than other firms. effect is pronounced labor-intensive...