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A study of the impact of real option investment on firms' long-term performance under uncertainty: Empirical evidence from China

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  • Li, Jiazhu
  • Wang, Haojun

Abstract

In today's volatile global business environment, uncertainty has become the norm. Firms must therefore enhance strategic flexibility to adapt to dynamic changes. Real options theory provides a framework for flexible decision-making under uncertainty, enabling firms to capture future growth opportunities. Yet, prior studies offer mixed evidence on how real options investment affects firm performance, especially over the long term. This study develops a theoretical framework grounded in organizational learning to examine this relationship and explores how different forms of uncertainty shape the value creation of real options investments. Using data on Chinese listed firms from 2007 to 2023, we find that real options investment improves long-term performance, and its effect is strengthened under higher uncertainty. The study integrates real options and organizational learning theories, offering new insights for strategic investment decisions in complex and uncertain environments.

Suggested Citation

  • Li, Jiazhu & Wang, Haojun, 2026. "A study of the impact of real option investment on firms' long-term performance under uncertainty: Empirical evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 96(C).
    • Handle: RePEc:eee:pacfin:v:96:y:2026:i:c:s0927538x25003543
    DOI: 10.1016/j.pacfin.2025.103017
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    Keywords

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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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