More Haste, Less Speed? Signaling through Investment Timing

We consider a cash-constrained firm learning on the value of an irreversible project at a privately known speed. Under perfect information, the optimal date of investment may be non-monotonic in the learning speed: better learning increases the value of experimenting further, but also the speed of updating. Under asymmetric information, the firm uses its investment timing to signal confidence in the project and raise cheaper capital from uninformed investors, which may generate timing distortions: investment is hurried when learning is sufficiently fast, and delayed otherwise. The severity of the cash constraint affects the magnitude of the distortion, but not its direction.