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Ownership structure and corporate liquidity policy
Author(s) -
Papaioannou George J.,
Strock Elizabeth,
Travlos Nickolaos G.
Publication year - 1992
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090130406
Subject(s) - market liquidity , business , monetary economics , liquidity crisis , stock (firearms) , economic rent , stock market , cash flow , liquidity risk , enterprise value , economics , financial system , finance , microeconomics , mechanical engineering , paleontology , horse , biology , engineering
This study analyzes the relationship between corporate liquidity (i.e. the fraction of assets invested in cash and marketable securities) and managerial ownership in the firm's stock. We postulate a negative relationship between excess liquidity and managerial stock ownership as the managers' interests shift from protecting the value of their human capital to maximizing the value of their stockholdings. This managerial behavior is constrained by the disciplining forces of the firm's product market structure and the market for corporate control. While the tests fail to reveal any significant impact of managerial stock ownership, they show that firm liquidity is positively related to the firm's ability to earn economic rents.