This paper shows that obligations from debt hinder tacit collusion if equity owners are protected by limited liability. In contrast to its advantageous commitment value in short-run competition, leverage reduces profits from infinite interaction. Contrasting uncorrelated shocks with a cyclical...

In einem kürzlich erschienenen ZfB-Beitrag schlagen Förster et al. eine Vorgehensweise für die Erfassung der Zinsschranke und ihrer Wirkung auf die zinsinduzierte Steuerersparnis vor. Dieser Beitrag nimmt kritisch dazu Stellung: Es wird gezeigt, dass die dort abgeleiteten Formeln für die...

This study examines the relationship between government deficit and corporate liquidity (cash holdings). Using data of nonfinancial firms in Taiwan from 1981 to 2009, this study finds that corporate liquidity is lower when government deficit is higher. In addition, corporate liquidity is related...

The present study investigates corporate liquidity (cash holdings) in emerging markets from 1990 to 2006. During the Asian financial crisis, firms in the majority of emerging markets examined in the present study held more cash. In addition, such an increase in cash holdings was the result of...

We study the simplest discrete-time finite-maturity model in which default arises when the firm is not able to pay its debt obligation using the current cash-flow plus the corporate liquidity. An important distinction is made between liquidity and solvency of the firm. The corporate financial...

Cash holdings as a proportion of total assets of U.S. corporations have roughly doubled between 1971 and 2006. Prior research attributes the large cash increase to a rise in firms’ idiosyncratic risk. We investigate two mechanisms by which increased idiosyncratic risk can lead to higher cash...

Agency problems are an important determinant of corporate liquidity. For a sample of more than 11,000 firms from 45 countries, we find that corporations in countries where shareholders rights are not well protected hold up to twice as much cash as corporations in countries with good shareholder...