Preferred habitat theory, proposed in the mid-1960s by Franco Modigliani and Richard Sutch, states that Investors prefer certain Investment timeframes. Companies that wish to issue securities whose timeframe is considered undesirable, will thus have to pay a Premium to attract Investors. See also Liquidity preference theory.

(See Chapter 20 Bonds of the Vernimmen)

To know more about it, look at what we have already written on this subject