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Kris­ti­an Miltersen

Professor

Subjects
Finance Mortgage finance Interest rates Securities Founding Companies

Primary research areas

Op­tim­al cap­it­al struc­ture of firms
What is the op­tim­al mix of debt and equity fin­an­cing for firms and how should it be dy­nam­ic­ally op­tim­ized over time. A cent­ral part of this an­swer to this ques­tion is also to in­clude the ques­tion of the op­tim­al ma­tur­ity of the firm’s debt.
Di­vidend policy, equity of­fer­ings, and cash and li­quid­ity man­age­ment of firms
What de­term­ines how much cash and li­quid­ity firms should have, and how does this change dy­nam­ic­ally over time? The an­swers to these ques­tions also in­volve de­term­in­ing how and when firms should get new in­jec­tions of cap­it­al (e.g., equity of­fer­ings) and how and when firms should dis­trib­ute cap­it­al back to its own­ers (e.g., di­vidends and/or re­pur­chas­ing stocks).
Dy­nam­ic in­ter­ac­tion between in­vest­ment and fin­an­cing of pro­jects in­side firms
Fin­an­cing and in­vest­ments de­pend mu­tu­ally on each oth­er dy­nam­ic­ally over time. When de­term­in­ing the fin­an­cing of a firm at a giv­en point in time, po­ten­tial fu­ture in­vest­ment op­por­tun­it­ies should be con­sidered, be­cause it may in­flu­ence the in­cent­ives to later ac­cept or re­ject these fu­ture in­vest­ment pro­jects. At the times when new in­vest­ment op­por­tun­it­ies are ad­ap­ted, this will be ac­com­pan­ied by a new round of fin­an­cing, which again needs to con­sider po­ten­tial new fu­ture in­vest­ment op­por­tun­it­ies.

By help­ing firms to make bet­ter in­vest­ment and fin­an­cing de­cisions, I help so­ci­ety

I completed my PhD on continuous-time term structure of interest rate models in 1992.  Since then, I have gradually drifted from fixed income asset pricing into real options and dynamic corporate finance models.  My most cited work is my Journal of Finance paper on the LIBOR Market model where we give a rational for, but also show the limitations of, the use of the Black-76 formula to price fixed income derivatives.  I have spent more than six years in Norway and more than four years in the US as part of my academic life.  

Together with a long list of co-authors, I have published work on:

Dynamic optimal capital structure and maturity of debt

Dynamic cash and liquidity management

The dynamic interlinkage between investments and financing

R&D investments and competition

Commodity and foreign exchange derivatives

Mortgages

Life insurance and pensions

My research is mainly theoretical. On the teaching side, I have over the years been teaching all the classical finance courses.  Lately, I have mainly been teaching Corporate Finance.

I am Head of Studies for the Study Board of Finance, Economics, and Mathematics.  I am PhD Coordinator for our department, and I am one of two vice chairs of Academic Council at CBS. 

Publications

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2025

Dynamic Debt Policy With and Without Commitment

Jens Dick-Ni­el­sen, Professor

Kri­sti­an Mil­ter­sen, Professor

Walter N. Torous
Go to publication

2025

Dynamic Debt Policy With and Without Commitment When Lenders can Observe the Firm's Issuance Activity

Jens Dick-Ni­el­sen, Professor

Kri­sti­an Mil­ter­sen, Professor

Walter N. Torous
Go to publication

December 2020

Second Mortgages

Valuation and Implications for the Performance of Structured Financial Products

Andrea C. Ghent

Kri­sti­an Mil­ter­sen, Professor

Walter N. Tourus
Go to publication

Recent research projects

Dy­nam­ic Debt Policy with Ob­serv­able Is­su­ance

We in­vest­ig­ate the dy­nam­ic game between equity and debt hold­ers in a tradeoff mod­el of cap­it­al struc­ture with pro­por­tion­al debt is­su­ance costs in which lenders can also ob­serve firms' is­su­ance activ­it­ies. There is an op­tim­al cap­it­al struc­ture in which firms re­tain pos­it­ive tax be­ne­fits with and without com­mit­ment. Cred­it­ors dis­cip­line equity hold­ers not to is­sue debt too ag­gress­ively and firms only is­sue in­fre­quently and in a lumpy fash­ion. This res­ult holds even without is­su­ance costs. High cred­it risk firms can­not al­ways is­sue debt without com­mit­ment where­as low cred­it risk firms are prac­tic­ally in­dif­fer­ent between com­mit­ting or not.

The pro­ject is co-au­thored with Jens Dick-Nielsen and Walt Tor­ous.

In­ter­ac­tion between Dy­nam­ic Fin­an­cing and In­vest­ments: The Role of Pri­or­ity Rules

We ana­lyze in a dy­nam­ic mod­el how debt pri­or­ity rules in­flu­ence firms' ini­tial cap­it­al struc­ture choice, in­vest­ment tim­ing, and sub­sequent debt is­sues. We quanti­fy de­vi­ations from first-best in­vest­ment be­ha­vi­or that arise from dif­fer­ent debt pri­or­ity rules, and doc­u­ment sur­pris­ingly large de­vi­ations caused by well-known rules such as the ab­so­lute pri­or­ity rule. We in­tro­duce a new rule, called the ef­fi­cient pri­or­ity rule (EPR), that gives equity hold­ers in­cent­ives to choose first-best in­vest­ment tim­ing and fin­an­cing. Un­der EPR, old debt has the same value and risk char­ac­ter­ist­ics as if the firm had not in­ves­ted and new debt had not been is­sued.

The pro­ject is co-au­thored with En­gel­bert Dock­ner and Jøril Mæ­land.
Working paper on SSRN

Per­son­al Taxes and Cor­por­ate Cash Hold­ings

Di­vidends are taxed at the per­son­al level, but in­ject­ing funds into firms does not of­fer the sym­met­ric tax be­ne­fit. Hence, there is a tax sav­ing in­cent­ive to re­tain cash in the firm. We de­vel­op a cor­por­ate fin­ance mod­el of li­quid­ity man­age­ment, in which the firm's li­quid­ity policy trades off pre­cau­tion and saved per­son­al taxes against agency and cor­por­ate tax costs. The mod­el im­plies that the tax sav­ing motive is sub­stan­tial and in­creas­ing with the di­vidend tax rate. Con­sist­ent with the mod­el, we em­pir­ic­ally show that af­fected firms re­duce their cash ac­cu­mu­la­tion after a di­vidend tax cut.

The pro­ject is co-au­thored with Jens Dick-Nielsen and Ra­mona Westrer­mann.
Working paper on SSRN

Outside activities

Ex­tern­al ex­am­iner and ad hoc eval­u­at­or at dif­fer­ent uni­ver­sit­ies , -