The idea of the paper is that firms accumulate bad projects during a boom. They hold onto them in order to—as I would put it—save face. When someone signals the end of a boom (for example, by coming to Congress with hurried legislation to bail out banks), it becomes ok to kill off the bad projects.
Arnold Kling, summarizing the paper Investment Busts, Reputation, and the Temptation to Blend in with the Crowd
