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Real options investments: Lessons from the US shale gas industry

Author

Listed:
  • Levan Elbakidze
  • Douglas Mugabe
  • Gulnara R. Zaynutdinova

Abstract

Using detailed project‐level investment data from the U.S. upstream natural gas industry, we examine the effect of the unexercised real options on individual firms’ real options investments. Drilling an unconventional well is a real options investment that is exercised by fracturing and completing the drilled well at an opportune time. We find a small negative but statistically significant effect of the number of unexercised options on real options investments. There is also a significant difference in the effect of unexercised real options on real options investment decisions of publicly traded and privately held firms.

Suggested Citation

  • Levan Elbakidze & Douglas Mugabe & Gulnara R. Zaynutdinova, 2025. "Real options investments: Lessons from the US shale gas industry," The Financial Review, Eastern Finance Association, vol. 60(3), pages 701-728, August.
    • Handle: RePEc:bla:finrev:v:60:y:2025:i:3:p:701-728
    DOI: 10.1111/fire.12428
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    References listed on IDEAS

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