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.
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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.
