PRODUCTIVITY
Journal of Integrated Business.
Management, and Accounting Research p-ISSN: 3063-9557 e-ISSN: 3063-8682 Vol.
No.
1, 2025
THE ROLE OF LIQUIDITY MANAGEMENT IN ENHANCING
CORPORATE FINANCIAL STABILITY:
A SYSTEMATIC LITERATURE REVIEW ON CASH RESERVES
AND MARKETABLE SECURITIES STRATEGIES
Fangandrododo Ndruru1 Universitas Sumatera Utara.
Jl.
Dr.
Mansur No.
Padang Bulan.
Medan.
Sumatera Utara 20222.
Indonesia Email: ndrurufangandrododo@gmail.
Article History Received: 19-12-2024 Revision: 03-01-2025 Accepted: 06-01-2025 Published: 09-01-2025 Abstract.
This study explores the role of liquidity management in enhancing corporate financial stability, focusing on cash reserves and tradable securities strategies.
Effective liquidity management helps companies manage financial risks and take advantage of investment opportunities, especially in the face of economic uncertainty.
This study uses a systematic literature review approach to analyze the relationship between liquidity, cash reserves, and tradable securities.
Cash reserves serve as a financial buffer to deal with cash flow fluctuations and reduce dependence on external funding.
Meanwhile, tradable securities provide additional financial flexibility through quick access to liquidity.
This study shows that companies that manage their liquidity well tend to have better financial stability, reduce bankruptcy risk, and increase investor This study also identifies research gaps, including the effects of financial technology and macroeconomic conditions on liquidity strategies.
The practical and theoretical implications of this study provide guidance for companies to manage their liquidity more effectively, ensure business continuity, and support long-term growth.
Keywords: Liquidity Management.
Financial Stability.
Cash Reserves.
Trading Securities.
Financial Risk Abstrak.
Artikel ini mengeksplorasi peran manajemen likuiditas dalam meningkatkan stabilitas keuangan perusahaan, dengan fokus pada cadangan kas dan strategi sekuritas yang dapat diperdagangkan.
Manajemen likuiditas yang efektif membantu perusahaan mengelola risiko keuangan dan memanfaatkan peluang investasi, terutama dalam menghadapi ketidakpastian perekonomian.
Penelitian ini menggunakan pendekatan tinjauan literatur sistematis untuk menganalisis hubungan antara likuiditas, cadangan kas, dan surat berharga yang dapat diperdagangkan.
Cadangan kas berfungsi sebagai penyangga keuangan untuk menghadapi fluktuasi arus kas dan mengurangi ketergantungan pada pendanaan eksternal.
Sementara itu, surat berharga yang dapat diperdagangkan memberikan fleksibilitas finansial tambahan melalui akses cepat terhadap likuiditas.
Penelitian ini menunjukkan bahwa perusahaan yang mengelola likuiditasnya dengan baik cenderung memiliki stabilitas keuangan yang lebih baik, mengurangi risiko kebangkrutan, dan meningkatkan kepercayaan investor.
Studi ini juga mengidentifikasi kesenjangan penelitian, termasuk pengaruh teknologi keuangan dan kondisi makroekonomi terhadap strategi likuiditas.
Implikasi praktis dan teoritis dari penelitian ini memberikan panduan bagi perusahaan untuk mengelola likuiditasnya dengan lebih efektif, menjamin kelangsungan bisnis, dan mendukung pertumbuhan jangka panjang.
Kata Kunci: Manajemen Likuiditas.
Stabilitas Keuangan.
Cadangan Kas.
Surat Berharga Yang Diperdagangkan.
Risiko Keuangan How to Cite: Ndruru.
The Role of Liquidity Management in Enhancing Corporate Financial Stability: a Systematic Literature Review on Cash Reserves and Marketable Securities Strategies.
PRODUCTIVITY: Journal of Integrated Business.
Management, and Accounting Research, 2 .
, 09-17.
http://doi.
org/10.
54373/product.
Ndururu.
The Role of Liquidity Management in Enhancing Corporate Financial Stability A INTRODUCTION In a dynamic and uncertain business environment, effective corporate liquidity management has become a crucial determinant of financial stability and resilience.
Liquidity, which refers to a companyAos ability to meet its short-term financial obligations, is a critical component of a companyAos overall financial health.
(Tuckman, 2.
Companies that maintain adequate levels of liquidity are better prepared to weather periods of economic uncertainty, cope with unexpected cash flow disruptions, and capitalize on emerging opportunities.
(Tuckman, 2.
In the world of finance, liquidity management plays a critical role in maintaining a companyAos financial stability.
Liquidity, which refers to an entityAos ability to meet its shortterm obligations, becomes increasingly relevant in the context of global economic uncertainty and market volatility.
This study aims to explore how cash reserve strategies and tradable securities can enhance a companyAos financial stability.
The background of this study is rooted in the financial crisis that occurred in 2007-2008, which showed that liquidity is a key factor in maintaining the integrity of the financial system (Longo, 2.
This research is rooted in the growing recognition of the critical role of liquidity management in enhancing a firmAos financial stability.
Effective liquidity management strategies, such as maintaining cash reserves and strategic allocation to marketable securities, can provide firms with the financial cushion needed to weather tough economic times and ensure business continuity.
(Berger et al.
, 2.
Many firms face challenges in managing their liquidity, especially amid rapid market fluctuations and stringent regulatory changes.
Therefore, this study aims to provide deeper insights into how cash reserves and marketable securities can be used as strategies to enhance liquidity and, in turn, financial stability (Portuese, 2.
The main objective of this study is to conduct a systematic literature review on the strategies and practices implemented by companies in managing their liquidity, with a particular focus on the use of cash reserves and tradable securities.
The contribution of this study lies in the development of a theoretical framework that links liquidity, cash reserves, tradable securities, and financial stability.
This study will not only provide a better understanding of the factors that influence financial stability but will also offer practical recommendations for companies in managing their liquidity more effectively (Moridu, 2.
This study aims to Analyze the role of liquidity management in maintaining the financial stability of companies amid economic shutdowns and market Identify the strategies used by companies in managing cash reserves and marketable securities to increase liquidity.
Explore the relationship between liquidity, cash reserves, and marketable securities with the financial stability of companies.
Ndururu.
The Role of Liquidity Management in Enhancing Corporate Financial Stability A METHOD This study uses a systematic literature review (SLR) approach to explore the role of liquidity management in improving corporate financial stability.
SLR is a structured and transparent method for identifying, evaluating, and synthesizing all relevant evidence related to a particular research question.
This approach allows researchers to collect and analyze data from various sources in a systematic manner, resulting in more valid and reliable conclusions Reiff & Schlegel .
The literature selection process begins with determining the inclusion and exclusion criteria.
Inclusion criteria include articles published in leading academic journals, books, and research reports that are relevant to the topics of liquidity management, cash reserves, and tradable securities.
Exclusion criteria include articles that are not peerreviewed, studies that are not relevant to the context of corporate finance, and literature that does not contribute significantly to the understanding of the relationship between liquidity and financial stability.
This process ensures that only high-quality and relevant literature is included in the analysis (Ghimire, 2.
The data sources used in this study include various academic journals, books, and research Some of the main sources used include .
academic journals such as The Journal of Finance.
Journal of Business Ethics, and Asia-Pacific Journal of Financial Studies, .
books and research reports that discuss liquidity management and financial stability, and .
academic databases such as JSTOR.
Google Scholar, and ProQuest to access relevant articles and publications (Harford et al.
, 2014.
Cho et al.
, 2018.
Gryko, 2.
The analysis procedure involves several steps.
First, the researcher collects data from literature that has been selected based on inclusion criteria.
Furthermore, the data is analyzed to identify patterns and relationships that emerge between the variables studied, namely liquidity, cash reserves, and tradable securities.
The analysis was carried out using the narrative synthesis method, where the researcher summarizes the findings from various studies and relates them to the research The results of this analysis are then used to identify existing research gaps and provide recommendations for further research (Nesara et al.
, 2020.
Riswati, 2.
RESULTS AND DISCUSSION
The Role of Liquidity in Financial Stability The literature shows that effective liquidity management is essential to maintaining a company's financial stability.
Companies that have sufficient liquidity can more easily meet short-term obligations and avoid the risk of bankruptcy (Gryko, 2.
Research by Harford et Ndururu.
The Role of Liquidity Management in Enhancing Corporate Financial Stability A .
shows that adequate cash reserves can serve as a buffer against unexpected financial risks, thereby increasing the company's resilience in facing crises (Harford et al.
, 2.
Liquidity management plays a crucial role in maintaining a company's financial stability, especially in an increasingly dynamic and uncertain business environment.
Company liquidity reflects the company's ability to meet its short-term obligations, while providing the operational flexibility needed to run business activities smoothly.
ffective liquidity management allows companies to increase resilience to economic shocks, take advantage of emerging investment opportunities, and reduce dependence on external financing costs.
Thus, companies that are able to manage their liquidity well tend to have stronger financial stability and are able to survive in uncertain economic situations.
Benefits of Cash Reserves in Liquidity Management One of the key elements in liquidity management is cash reserves.
Cash reserves serve as a financial buffer that can help companies meet unexpected obligations, such as sudden payments or unexpected cash flow fluctuations.
The existence of cash reserves also allows companies to reduce dependence on external funding which tends to be expensive, while providing flexibility to take urgent investment opportunities.
In addition, adequate cash reserves also provide a positive signal to investors and creditors, because they reflect the company's readiness to face various financial situations.
Thus, cash reserves are a vital component in maintaining the company's financial stability.
Various studies have shown that cash reserves play an important role in liquidity High cash reserves allow companies to make better investment decisions and reduce dependence on debt (Cho et al.
, 2.
Research by Asem and Alam .
highlights that companies tend to accumulate cash reserves to overcome potential cash flow shortages in the future, which shows the importance of cash reserves in liquidity management strategies (Asem & Alam, 2.
The Role of Tradable Securities as a Liquidity Strategy Tradable securities also serve as an important tool in liquidity management.
Companies can quickly convert these securities into cash to meet short-term obligations, thereby increasing their financial flexibility (Gryko, 2.
Research by Ghimire .
shows that companies with a diversified portfolio of securities tend to be more resilient in volatile market conditions (Ghimire, 2.
Ndururu.
The Role of Liquidity Management in Enhancing Corporate Financial Stability A Securities offer additional flexibility to companies by providing additional sources of liquidity that are relatively low risk.
In this context, companies can use tradable securities to diversify their liquidity portfolio, thereby reducing concentration risk.
In addition, these securities provide higher potential returns compared to cash, allowing companies to optimize their asset management.
Under certain conditions, tradable securities can even serve as a substitute for cash reserves, especially when companies need more dynamic liquidity.
Relationship Between Liquidity.
Cash Reserves, and Tradable Securities Analysis of the relationship between liquidity, cash reserves, and tradable securities shows significant synergy.
Companies that manage these three elements well tend to have better financial stability, as they can quickly adjust their financial strategies according to changing market conditions (Nesara et al.
, 2020.
Riswati, 2.
Cash reserves and tradable securities form a strong liquidity buffer to face various financial situations.
The optimal composition of cash and securities depends largely on the specific needs of the company, including risk profile, industry sector, and market dynamics.
In this context, effective liquidity management requires a balance between these three components to ensure that the company can meet short-term obligations without sacrificing long-term return potential.
Research Gap Identification Although various studies have highlighted the importance of liquidity management, there are several areas that still require further exploration.
One of them is the impact of technology and financial innovation on liquidity management strategies, which is still a topic that has received less attention.
Research by Salsabilla and Imronuddin .
shows that the integration of financial technology .
can improve bank financial performance by improving liquidity levels, but its specific impact on the company's liquidity management strategy in general still needs to be studied further.
In addition, the influence of macroeconomic factors on company liquidity decisions is also an area that requires more attention.
In research by Almurni et al.
, it was found that macroeconomic conditions can affect the capital structure of technology companies, but how this interacts with liquidity decisions is still not fully understood.
Therefore, further research is needed to explore how companies from different industries and sizes can optimize their liquidity strategies in the context of changing economic conditions.
Ndururu.
The Role of Liquidity Management in Enhancing Corporate Financial Stability A The effectiveness of various liquidity instruments in a crisis scenario is also an important area to study.
Research by Surachman .
highlights that financial innovation can help companies better manage financial risks, but the effectiveness of specific liquidity instruments in crisis situations is still underexplored.
Integration of liquidity management and overall risk management strategies is crucial to understanding how companies can survive and thrive amid market uncertainty.
Thus, there is an urgent need for more in-depth research on the impact of financial technology, macroeconomic factors, and the effectiveness of liquidity instruments in the context of a crisis.
This will provide valuable insights for companies in formulating more effective and responsive liquidity management strategies to the changing market dynamics.
Practical And Theoretical Implications Practical implications.
the findings of this study can help financial practitioners in managing corporate liquidity more effectively.
By understanding the importance of cash reserves and tradable securities, financial managers can make better decisions regarding asset and liability management (Jebran et al.
, 2.
Theoretical implications.
this study also contributes to the development of theories in liquidity management and corporate financial By identifying the relationship between liquidity, cash reserves, and tradable securities, this study enriches the existing literature and provides a basis for further research in this area (Morcov et al.
, 2.
CONCLUSION
This study has examined in depth the role of liquidity management in improving corporate financial stability, focusing on cash reserves and tradable securities.
Through a systematic literature review approach, this study has successfully identified significant patterns and relationships between the three elements, and provided valuable insights for financial practitioners and academics.
First, the results of the analysis show that liquidity plays a crucial role in maintaining corporate financial stability.
Companies that are able to manage liquidity well tend to be better able to face financial challenges and avoid the risk of bankruptcy.
Adequate liquidity allows companies to meet short-term obligations and maintain operational continuity, especially in uncertain market conditions.
Previous studies have also confirmed that effective liquidity management can reduce financial risk and increase investor confidence ( Second, cash reserves have proven to be an important element in liquidity management Companies with sufficient cash reserves can make better investment decisions and reduce their reliance on debt.
Cash reserves act as a buffer against unexpected financial risks.
Ndururu.
The Role of Liquidity Management in Enhancing Corporate Financial Stability A providing flexibility in decision-making and protection against cash flow fluctuations.
Research by Asem and Alam .
shows that the accumulation of cash reserves can help companies overcome potential cash flow shortages in the future, thereby increasing their resilience in the face of crises (Asem & Alam, 2.
Third, marketable securities also play an important role in liquidity management.
having a diversified portfolio of securities, companies can quickly convert these assets into cash to meet short-term obligations.
This increases financial flexibility and allows companies to adapt quickly to changing market conditions.
Research shows that companies that use marketable securities as part of their liquidity strategy tend to be more resilient in difficult market conditions (Gryko, 2024.
Nesara et al.
, 2.
Furthermore, the analysis of the relationship between liquidity, cash reserves, and marketable securities shows significant Companies that manage these three elements well not only improve their financial stability but also create added value for stakeholders.
This interconnectedness highlights the importance of a holistic approach to liquidity management, where companies need to consider the interactions between various financial elements to achieve their long-term goals.
However, this study also identifies several gaps that need further research.
For example, the relationship between liquidity management and long-term corporate performance is still Further research is needed to understand how liquidity management strategies can be integrated with broader risk management practices, as well as to explore the impact of monetary policy and macroeconomic conditions on corporate liquidity management.
Overall, the findings of this study contribute significantly to our understanding of corporate liquidity management and financial stability.
This study provides not only theoretical insights but also practical implications for financial practitioners in managing corporate liquidity more By understanding the importance of cash reserves and marketable securities, financial managers can make better decisions regarding the management of assets and liabilities, thereby increasing the company's future financial resilience and stability.
REFERENCES