The influence of financial constraints and real options on corporate investment decisions
This 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.
|Date of creation:||2013|
|Date of revision:|
|Publication status:||Published in WP BRP Series: Financial Economics / FE, September 2013, pages 1-21|
|Contact details of provider:|| Postal: Myasnitskaya 20, Moscow 101000|
Web page: http://www.hse.ru/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pindyck, Robert S. & Solimano, Andres, 1993.
"Economic instability and aggregate investment,"
Policy Research Working Paper Series
1148, The World Bank.
- Pindyck, Robert S. & Solimano, Andrés., 1993. "Economic instability and aggregate investment," Working papers 3552-93., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Robert S. Pindyck & Andres Solimano, 1993. "Economic Instability and Aggregate Investment," NBER Working Papers 4380, National Bureau of Economic Research, Inc.
- Bo, Hong & Sterken, Elmer, 2007. "Attitude towards risk, uncertainty, and fixed investment," The North American Journal of Economics and Finance, Elsevier, vol. 18(1), pages 59-75, February.
- Greenwald, Bruce & Stiglitz, Joseph E & Weiss, Andrew, 1984.
"Informational Imperfections in the Capital Market and Macroeconomic Fluctuations,"
American Economic Review,
American Economic Association, vol. 74(2), pages 194-99, May.
- Bruce C. Greenwald & Joseph E. Stiglitz & Andrew Weiss, 1984. "Informational Imperfections in the Capital Market and Macro-Economic Fluctuations," NBER Working Papers 1335, National Bureau of Economic Research, Inc.
- Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
- Hong Bo & Jan Jacobs & Elmer Sterken, 2006. "A threshold uncertainty investment model for the Netherlands," Applied Financial Economics, Taylor & Francis Journals, vol. 16(9), pages 665-673.
- Hansen, Bruce E, 1996.
"Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis,"
Econometric Society, vol. 64(2), pages 413-30, March.
- Hansen, B.E., 1991. "Inference when a Nuisance Parameter is Not Identified Under the Null Hypothesis," RCER Working Papers 296, University of Rochester - Center for Economic Research (RCER).
- Tom Doan, . "TAR: RATS procedure to estimate a threshold autoregression, tests for threshold effect," Statistical Software Components RTS00209, Boston College Department of Economics.
- Tom Doan, . "RATS programs to replicate Hansen's threshold estimation and testing results," Statistical Software Components RTZ00091, Boston College Department of Economics.
- George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
- Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
- Ricardo J. Caballero & Robert S. Pindyck, 1992.
"Uncertainty, Investment, and Industry Evolution,"
NBER Working Papers
4160, National Bureau of Economic Research, Inc.
- Glenn W. Boyle & Graeme A. Guthrie, 2003. "Investment, Uncertainty, and Liquidity," Journal of Finance, American Finance Association, vol. 58(5), pages 2143-2166, October.
- Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
- Xie, Feixue, 2009. "Managerial flexibility, uncertainty, and corporate investment: The real options effect," International Review of Economics & Finance, Elsevier, vol. 18(4), pages 643-655, October.
- Whited, Toni M, 1998. "Why Do Investment Euler Equations Fail?," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 479-88, October.
- Whited, Toni M, 1992.
" Debt, Liquidity Constraints, and Corporate Investment: Evidence from Panel Data,"
Journal of Finance,
American Finance Association, vol. 47(4), pages 1425-60, September.
- Toni M. Whited, 1990. "Debt, liquidity constraints, and corporate investment: evidence from panel data," Finance and Economics Discussion Series 114, Board of Governors of the Federal Reserve System (U.S.).
- Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
When requesting a correction, please mention this item's handle: RePEc:hig:wpaper:17/fe/2013. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamil Abdulaev)or (Victoria Elkina)
If references are entirely missing, you can add them using this form.