S-Space College of Business Administration/Business School (경영대학/대학원) Institute of Finance and Banking (증권,금융연구소) The Journal of finance and banking (증권금융저널) The Journal of finance and banking (증권금융저널) vol.02 (2003)
Financial Distress, Liquidity Policy, and Financing Policy: A Comparison of Korea and the United States
- Lee, Hae Young; Fields, M. Andrew
- Issue Date
- 서울대학교 증권.금융연구소
- 증권금융, Vol.02, pp. 159-177
- This paper develops models for identifying the interrelationship between a firm's probability of financial distress and both its liquidity and financial policy decisions. And it empirically investigates the models using both Korea Stock Exchange firm panel data and those of a matched industry sample of Nasdaq firms from the United States. The results for both the Korean and the U.S. samples provide strong evidence that a higher level of liquidity and a lower level of debt are consistent with a firm having a lower probability of financial distress. Results also show that financial distress and financial policy are important determinants of a firm's liquidity policy. Finally, results show that there is a negative relationship between liquidity policy and debt financing, and a positive relationship between financial distress and the level of debt financing.