long time. -- liquidity trap ; financial crisis ; rare disasters ; equity capital ; leverage ; bankruptcy risk …This paper explains the emergence of liquidity traps in the aftermath of large-scale financial crises, as happened in … equity capital to the risk-free interest rate. When equity capital falls, bankruptcy risks rise. Firms become more vulnerable …

We construct a theoretical framework to investigate the impact of liquidity risk, in the secondary corporate debt … fundamentals. Empirically, we confirm the positive relationship between liquidity risk and corporate risk-taking. We also document … that the impact of liquidity risk on corporate risk-taking preferences is more pronounced for smaller firms and firms with …