Value Support of Liquidity and Enterprise Financing Demand:Implications for Significance of Reasonable and Sufficient Liquidity
Maintaining reasonable and robust liquidity is essential to foster economic growth.This paper explores the role of liquidity in supporting corporate financing decisions and its subsequent impact on corporate investment choices and macroeconomic growth.By examining the dual nature of corporate financing—comprising both liquid demand and invest-ment demand—this study sheds light on how liquidity dynamics influence economic behavior.Our analysis reveals that solely increasing nominal liquidity,in the absence of corresponding increases in liquidity value support,may lead to a de-cline in real purchasing power and heightened liquidity constraints.Consequently,companies tend to allocate a larger por-tion of their financing towards addressing liquidity needs for survival.Moreover,a decrease in liquidity value support prompts firms to augment their overall financing demand.However,even when firms secure liquidity,they tend to prioritize using these funds to fulfill immediate liquidity requirements,such as covering operating expenses,rather than allocating them towards long-term investments.This study underscores the importance of understanding the intricate relationship be-tween liquidity and economic functioning.It emphasizes the need for policymakers to accurately gauge and maintain reason-able and sufficient liquidity levels to ensure finance better serves the real economy.Additionally,by averting abnormal liquidity-induced financial risks,policymakers can safeguard economic stability and growth effectively.
Value support of liquidityCorporate financing and investmentReasonable and sufficient liquidityReal economy
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