Publications [#267529] of S. Viswanathan

Journal Articles

1. Acharya, VV; Viswanathan, S, Leverage, Moral Hazard, and Liquidity, Journal of Finance, vol. 66 no. 1 (February, 2011), pp. 99-138, WILEY, ISSN 0022-1082 [doi]
   (last updated on 2026/01/15)

   Abstract:
   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.