Liquidity, the Value of the Firm, and Corporate Finance
The theory of corporate finance has been based on the idea that a company's market value is determined mainly by just two variables: the company's expected after-tax operating cash flows or earnings, and the risk associated with producing them. The authors argue that there is another important factor affecting a company's value: the liquidity of its own securities, debt as well as equity. The paper supports this argument by reviewing the large and growing body of evidence showing that differences-and changes-in liquidity can have major effects on the pricing of corporate stocks and bonds or, equivalently, on investors' required returns for holding them. Copyright (c) 2008 Morgan Stanley.
Year of publication: |
2008
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Authors: | Amihud, Yakov ; Mendelson, Haim |
Published in: |
Journal of Applied Corporate Finance. - Morgan Stanley, ISSN 1078-1196. - Vol. 20.2008, 2, p. 32-45
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Publisher: |
Morgan Stanley |
Saved in:
freely available
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