Excess Capital and Liquidity Management

Levy Economics Institute Working Papers No. 549

10 Pages Posted: 23 Nov 2008

See all articles by Jan Toporowski

Jan Toporowski

University of London - School of Oriental and African Studies (SOAS)

Date Written: November 19, 2008

Abstract

These notes present a new approach to corporate finance, one in which financing is not determined by prospective income streams but by financing opportunities, liquidity considerations, and prospective capital gains. This approach substantially modifies the traditional view of high interest rates as a discouragement to speculation; the Keynesian and Post-Keynesian theory of liquidity preference as the opportunity cost of investment; and the notion of the liquidity premium as a factor in determining the rate of interest on longer-term maturities.

Keywords: Capital structure, financing, overcapitalization, interest rates, liquidity

JEL Classification: D21, G32

Suggested Citation

Toporowski, Jan, Excess Capital and Liquidity Management (November 19, 2008). Levy Economics Institute Working Papers No. 549, Available at SSRN: https://ssrn.com/abstract=1304286 or http://dx.doi.org/10.2139/ssrn.1304286

Jan Toporowski (Contact Author)

University of London - School of Oriental and African Studies (SOAS) ( email )

Thornhaugh Street
Russell Square: College Buildings 541
London, WC1H 0XG
United Kingdom

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