TY  - JOUR
AU  - Milbradt, Konstantin
AU  - Oehmke, Martin
TI  - Maturity Rationing and Collective Short-Termism
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 19946
PY  - 2014
Y2  - February 2014
DO  - 10.3386/w19946
UR  - http://www.nber.org/papers/w19946
L1  - http://www.nber.org/papers/w19946.pdf
N1  - Author contact info:
Konstantin Milbradt
Kellogg School of Management
Northwestern University
2001 Sheridan Rd #401
Evanston, IL 60208
Tel: 847/491-8618
Fax: 847/491-5719
E-Mail: milbradt@northwestern.edu

Martin Oehmke
Department of Finance
London School of Economics
Houghton Street
London WC2A 2AE UK
Tel: 212/851-1804
E-Mail: m.oehmke@lse.ac.uk
M1  - published as Konstantin Milbradt, Martin Oehmke. "Maturity Rationing and Collective Short-Termism," in Viral V. Acharya, Heitor Almeida, and Malcolm Baker, organizers, "New Perspectives on Corporate Capital Structure" Elsevier, Journal of Financial Economics 118(3) (2015)

AB  - 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.
ER  -