The influence of financial constraints and real options on corporate investment decisions
AbstractThis paper presents evidence of the negative combined effect of financial constraints and real options on corporate investment. Using panel data on public companies functioning in developed countries, the authors prove that with increasing uncertainty surrounding a firm, the real options effect increases the influence of financial constraints on investment. To this end we have found the threshold value of the option multiple, which switches the uncertainty regimes from relatively high to relatively low, and we have constructed an index of financial constraints.
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Bibliographic InfoPaper provided by National Research University Higher School of Economics in its series HSE Working papers with number WP BRP 17/FE/2013.
Length: 21 pages
Date of creation: 2013
Date of revision:
Publication status: Published in WP BRP Series: Financial Economics / FE, September 2013, pages 1-21
investment decisions; index of financial constraints; real options to delay;
Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models
- D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
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