Download or read book Two Essays on Corporate Liquidity Management written by Chang Liu (Writer on finance) and published by . This book was released on 2018 with total page 115 pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation contains two essays regarding corporate liquidity management. In the first essay, we find that personal connections between borrowers and lenders have a significant impact on the choice of corporate liquidity. Connected firms tend to obtain larger credit lines and hold less cash. Closer personal ties result in easier access to credit lines during economic shocks, such as financial crisis and negative news of credit quality. In addition, connections help firms with tighter financial constraints or higher risk obtain larger amount of credit lines. Connections also increase the amount of credit lines of borrowers with less public debt. Overall, our findings suggest that reduced asymmetric information between borrowers and lenders can improve corporate liquidity management. In the second essay, we study the relationship between corporate liquidity choice and market value by using the market-to-book decomposition of Rhodes-Kropf, Robinson, and Viswanathan (2005). We find that sector overvaluation or long-run growth usually increase the portion of cash in the total corporate liquidity. The effect is stronger in firms with larger growth opportunities, better corporate governance, or longer investor horizons. Moreover, the choice between cash and credit lines for firms without credit ratings are more sensitive to the sector overvaluation or long-run growth. In addition, we find sector error and long-run growth have stronger effects on corporate liquidity in the long horizons.