NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Konstantin Milbradt

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Working Papers and Chapters

February 2014Maturity Rationing and Collective Short-Termism
with Martin Oehmke: w19946
Financing terms and investment decisions are jointly determined. This interdependence links firms’ asset and liability sides and can lead to short-termism in investment. In our model, financing frictions increase with the investment horizon, such that financing for long-term projects is relatively expensive and potentially rationed. In response, firms whose first-best investment opportunities are long-term may change their investments towards second-best projects of shorter maturities. This worsens financing terms for firms with shorter maturity projects, inducing them to change their investments as well. In equilibrium, investment is inefficiently short-term. Equilibrium asset-side adjustments by firms can amplify shocks and, while privately optimal, can be socially undesirable.

Forthcoming: Maturity Rationing and Collective Short-Termism, Konstantin Milbradt, Martin Oehmke. in Understanding the Capital Structures of Non-Financial and Financial Corporations, Acharya, Almeida, and Baker. 2014

September 2012Endogenous Liquidity and Defaultable Bonds
with Zhiguo He: w18408
This paper studies the interaction between fundamental and liquidity for defaultable corporate bonds that are traded in an over-the-counter secondary market with search frictions. Bargaining with dealers determines a bond's endogenous liquidity, which depends on both the firm fundamental and the time-to-maturity of the bond. Corporate default decisions interact with the endogenous secondary market liquidity via the rollover channel. A default-liquidity loop arises: Earlier endogenous default worsens a bond's secondary market liquidity, which amplifies equity holders' rollover losses, which in turn leads to earlier endogenous default. Besides characterizing in closed form the full inter-dependence between liquidity premium and default premium for credit spreads, we also study the optimal ma...

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

 
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