Leverage, Moral Hazard, and Liquidity
Publication
, Journal Article
Acharya, VV; Viswanathan, S
Published in: Journal of Finance
February 1, 2011
Financial firms raise short-term debt to finance asset purchases; this induces risk shifting when economic conditions worsen and limits their ability to roll over debt. Constrained firms de-lever by selling assets to lower-leverage firms. In turn, asset-market liquidity depends on the system-wide distribution of leverage, which is itself endogenous to future economic prospects. Good economic prospects yield cheaper short-term debt, inducing entry of higher-leverage firms. Consequently, adverse asset shocks in good times lead to greater de-leveraging and sudden drying up of market and funding liquidity. © 2011 the American Finance Association.
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Published In
Journal of Finance
DOI
EISSN
1540-6261
ISSN
0022-1082
Publication Date
February 1, 2011
Volume
66
Issue
1
Start / End Page
99 / 138
Related Subject Headings
- Finance
- 3801 Applied economics
- 3502 Banking, finance and investment
- 1502 Banking, Finance and Investment
Citation
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Chicago
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Acharya, V. V., & Viswanathan, S. (2011). Leverage, Moral Hazard, and Liquidity. Journal of Finance, 66(1), 99–138. https://doi.org/10.1111/j.1540-6261.2010.01627.x
Acharya, V. V., and S. Viswanathan. “Leverage, Moral Hazard, and Liquidity.” Journal of Finance 66, no. 1 (February 1, 2011): 99–138. https://doi.org/10.1111/j.1540-6261.2010.01627.x.
Acharya VV, Viswanathan S. Leverage, Moral Hazard, and Liquidity. Journal of Finance. 2011 Feb 1;66(1):99–138.
Acharya, V. V., and S. Viswanathan. “Leverage, Moral Hazard, and Liquidity.” Journal of Finance, vol. 66, no. 1, Feb. 2011, pp. 99–138. Scopus, doi:10.1111/j.1540-6261.2010.01627.x.
Acharya VV, Viswanathan S. Leverage, Moral Hazard, and Liquidity. Journal of Finance. 2011 Feb 1;66(1):99–138.
Published In
Journal of Finance
DOI
EISSN
1540-6261
ISSN
0022-1082
Publication Date
February 1, 2011
Volume
66
Issue
1
Start / End Page
99 / 138
Related Subject Headings
- Finance
- 3801 Applied economics
- 3502 Banking, finance and investment
- 1502 Banking, Finance and Investment