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The Delaying Effect of Financing Constraints on Investment

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  • Mindel van de Laar
  • Wilko Letterie

Abstract

We develop a simple model in which a firm considers a number of investment projects. Because of limited financial resources, the firm can undertake at most one project. In line with the literature on real options we stress features like irreversibility, uncertainty and the possibility of postponing the investment decision and show under which conditions limited availability of funds tends to increase the value of waiting. Copyright Blackwell Publishers Ltd and the Board of Trustees of the Bulletin of Economic Research, 2004.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Bulletin of Economic Research.

Volume (Year): 56 (2004)
Issue (Month): 3 (07)
Pages: 271-281

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Handle: RePEc:bla:buecrs:v:56:y:2004:i:3:p:271-281

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Cited by:
  1. Laar,Mindel,van de, 2004. "Financing Dutch direct investments to transition economics," Research Memorandum 030, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).

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