Enterprise Liquidity Risk Management

As the vitality of enterprises, liquidity is necessary to ensure the normal oper-ation of enterprises. The occurrence of liquidity risk accidents tends to endanger the survival of the enterprise, and even spread to the entire community. Unsur-prisingly, liquidity planning is central to the practice of corporate finance and consumes a large fraction of chief financial officers’ time. Studies for liquidity and risk management have never stopped.At present, research on liquidity risk are concentrated on definition, classi-fication and measurement through qualitative analysis. Some scholars have dis-cussed the impact and causes of liquidity risk by empirical analysis. However, few scholars have made theoretical study for liquidity risk management, from the perspective of demand for liquidityBased on the external financing analysis framework under asymmetric infor-mation and variable-investment, this paper introduces a chance of reinvestment which could increase the probability of success, that is, a profitable growth oppor-tunity for the firm. And then establishes the model of liquidity needs in the case of endogenous and exogenous investment scale respectively. Both of the theory and numerical calculations show that this kind of profitable growth opportunity could significantly improve the firm’s liquidity needs.This paper explores the methods for liquidity risk management, based on the liquidity needs model, the entrepreneur must hoard enough liquidity in order to face the liquidity shock. Otherwise, the enterprise must refinance after the happening of liquidity shock. Good growth opportunities can increase their ability to raise funds at that time. However, funds which the enterprises could raise are limited, whether it is to issue new debts or stocks.