We study how securities and issuance mechanisms can be designed to mitigate the adverse impact of market imperfections on liquidity. In our model, asset owners seek to obtain liquidity by selling claims contingent on privately observed future cash-flows. Liquidity suppliers can be competitive or strategic. In the optimal trading mechanism associated to an arbitrary given security, issuers with ...

We analyze a model of optimal capital structure and liquidity choice based on a dynamic tradeoff theory for financially constrained firms. In addition to the classical tradeoff between the expected tax advantages of debt financing and bankruptcy costs, we introduce a cost of external financing for the firm, which generates a precautionary demand for cash and an optimal retained earnings policy ...

We develop a dynamic model of firm in which cash management is partially delegated to self-interested manager. Shareholders trade off the cost dismissing manager with managerial discretion over use liquid funds. An improvement corporate governance quality may have positive or negative effect on levels and values balances, depending source improvement. While reduction entrenchment results lower ...