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Optimal Investment Timing and Volume Decisions under Debt Borrowing Constraints

In: 2012 Recent Advances in Financial Engineering Proceedings of the International Workshop on Finance 2012

Author

Listed:
  • Takashi Shibata
  • Michi Nishihara

Abstract

This paper examines the optimal investment threshold (timing) and volume strategies under debt borrowing constraints on the condition that an increase in investment volume increases cash inflow. As debt borrowing limits increase, the firm is more likely to prefer market debt to bank debt. Although debt borrowing constraints distort the investment threshold, they have no influence on the optimal investment volume. Debt borrowing constraints have the possibility of distorting the interactions between equity values and the investment threshold.

Suggested Citation

  • Takashi Shibata & Michi Nishihara, 2014. "Optimal Investment Timing and Volume Decisions under Debt Borrowing Constraints," World Scientific Book Chapters, in: Akihiko Takahashi & Yukio Muromachi & Takashi Shibata (ed.), 2012 Recent Advances in Financial Engineering Proceedings of the International Workshop on Finance 2012, chapter 6, pages 117-131, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814571647_0006
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