On Debt Financing and Investment Timing
This paper studies the relationship between debt-financing and the timing of investment, under asymmetric information. In particular we show that an option to delay raises the average profitability of firms who choose to invest immediately, thereby reducing the market interest rate on debt. Moreover, the option to delay is shown to be welfare improving.
Volume (Year): 15 (2002)
Issue (Month): 2 (Autumn)
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