A Theoretical Study of Relationship between Liquidity, Corporate Governance, and Firm Value

ABSTRACT: A few experimental studies have been carried out about the relationship between liquidity, corporate governance, and the firm value. Nowadays, making a decision for determining the degree of cash reserves in companies has become one of the significant factors in the financing literature. How internal funds are spent is an important decision of stockholders and managers. Financial transparency and information disclosure are important factors of the corporate governance. The major objective of the research is to theoretically study the relationship between liquidity, corporate governance, and firm value according to the literature in these areas. Results of the study suggest a positive relationship between the liquidity and the corporate governance, and the strong positive effect of corporate governance on the firm value.