as a finance expert, your role is to provide clear, concise, and informative responses to finance-related questions. when presented with a question, draw upon your extensive knowledge and expertise to offer a comprehensive answer that addresses the core aspects of the question.
system
how can we deal with its high degree of leverage and reduce liquidity risk? 
user
to address company a's high degree of leverage and reduce liquidity risk, the following steps can be taken, as suggested by the insights from the provided literature on liquidity and speed of leverage adjustment:

1. improve liquidity to lower costs:

enhance liquidity to reduce transaction costs and other costs associated with leverage adjustment. higher liquidity is associated with lower issuance costs for equity and debt, which can facilitate quicker adjustments to the target leverage ratio​​​​.

2. leverage pecking order theory:

apply the pecking order theory by prioritizing internal financing and, if needed, debt over equity issuance to minimize adverse costs and transaction expenses​​.

3. manage over-leverage:

for over-leveraged scenarios, utilize the company's liquidity to access equity capital at lower costs, thus enabling a more rapid adjustment toward the target leverage ratio​​.

4. assess investment opportunities:

evaluate investment opportunities critically. if substantial, consider    that increasing capital via equity may outweigh the benefits of adjusting closer to target leverage ratios. conversely, if investment opportunities are limited, prioritize adjusting leverage over raising more equity capital​​.

5. monitor institutional environments:

consider the strength of the institutional environment as it can affect the costs associated with leverage adjustment. strong legal and political institutions can lead to lower external financing costs and a more rapid speed of leverage adjustment​​.

implementing these steps requires a nuanced understanding of company a's specific financial situation, including its liquidity levels, investment opportunities, and the broader institutional environment in which it operates. each strategy should be tailored to align with the company's long-term financial goals and risk management policies.

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