Both investors and borrowers are concerned about liquidity. Investors desire liquidity because they are uncertain about … when they will want to eliminate their holding of a financial asset. Borrowers are concerned about liquidity because they … compensation for the illiquidity investors will be subject to. We argue that banks can resolve these liquidity problems that arise …

We provide evidence that credit lines offer liquidity insurance to borrowers. Borrowers are able to extensively use … credit rating downgrades and credit line cuts, suggesting substantial liquidity access before credit line cuts. Credit line … to draw down. Building on this evidence, we develop a model where syndicates faced with liquidity shocks continue to …

This paper studies the interaction between fundamental and liquidity for defaultable corporate bonds that are traded in … liquidity, which depends on both the firm fundamental and the time-to-maturity of the bond. Corporate default decisions interact … with the endogenous secondary market liquidity via the rollover channel. A default-liquidity loop arises: Earlier …

Is greater trading liquidity good or bad for corporate governance? We address this question both theoretically and … information concerns her own plans for taking an active role in governance. We show that an increase in the liquidity of the firm …'s stock increases the likelihood of the large investor 'taking the Wall Street walk.' Thus, higher liquidity is harmful for …

market liquidity to vary from `normal' periods, when all assets are fully liquid, to 'illiquidity crises,' when some assets … can only be traded infrequently. The possibility of a liquidity crisis leads to limited arbitrage in normal times …

Treasury bills and other near-money assets provide owners with liquidity service benefits that are reflected in prices … in the form of a liquidity premium. I relate time variation in this liquidity premium to changes in the opportunity cost … of money: The liquidity service benefits of near-money assets are more valuable when short-term interest rates are high …

efficiency consequences. For example, lowering the cost of supplying liquidity on the spot (e.g., through direct injection of …This paper presents an equilibrium model for the demand and supply of liquidity and its impact on asset prices and … liquidity and large price deviations from fundamentals. Moreover, market forces fail to lead to efficient supply of liquidity …

We provide a model that links an asset's market liquidity - i.e., the ease with which it is traded - and traders …' funding liquidity - i.e., the ease with which they can obtain funding. Traders provide market liquidity, and their ability to … are charged, depend on the assets' market liquidity. We show that, under certain conditions, margins are destabilizing and …

dire consequences in terms of under-provision of market liquidity, has been repeatedly raised. This paper presents … systematic evidence from four different estimation strategies of the absence of breakpoints in market liquidity for fixed …-income asset classes and across multiple liquidity measures, with special attention given to the corporate bond market. The …

We study a modification of the Diamond and Dybvig (1983) model in which the bank may hold a liquid asset, some … depositors see sunspots that could lead them to run, and all depositors have incomplete information about the bank's ability to … survive a run. The incomplete information means that the bank is not automatically incentivized to always hold enough liquid …