Kristian Miltersen, CBS Copenhagen Business School

Campus WU Vienna TC.3.08 12:00 - 13:00

Organizer WU Vienna

The Finance Brown Bag Seminar is held by the Institute for Finance, Banking and Insurance (WU Vienna) and the Vienna Graduate School of Finance (VGSF). It serves as a presentation platform for PhD students, faculty members, and visitors. An overview of BBS on the website of the Institute for Finance, Banking and Insurance.


Kristian Miltersen, CBS Copenhagen Business School

(joint with Jens Dick-Nielsen and Walter N. Torous)

Incremental Issuance in a Model of Risky Debt with Proportional Issuance Costs

We study incremental issuance of corporate debt with and without commitment in a model where earnings are log-normally distributed.  We provide a non-smooth Markov perfect equilibrium solution as an alternative to the smooth Markov perfect equilibrium developed by DeMarzo and He (2021).  In our no commitment non-smooth equilibrium, equity holders gain positive tax benefits to leverage, there is a unique optimal leverage ratio, and a unique optimal maturity structure of debt.

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