search query: @freeterm REAL OPTIONS / total: 18
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| Author: | Morellec, E. Schürhoff, N. |
| Title: | Corporate investment and financing under asymmetric information |
| Journal: | Journal of Financial Economics
2011 : FEB, VOL. 99:2, p. 262-288 |
| Index terms: | corporate finance investment decision making asymmetric information models |
| Freeterms: | real options |
| Language: | eng |
| Abstract: | A dynamic model of corporate investment and financing decisions is developed. In the model corporate insiders have superiour information about the firm's growth prospects. Among others, it is shown that firms with positive private information can credibly signal their type to outside investors using the timing of corporate actions and their debt-equity mix. Based on this result, asymmetric information is shown to induce firms with good prospects to speed up investment which leads to a significant erosion of the option value of waiting to invest. Finally, produced is a broad set of testable implications relating firms' investment and financing strategies etc. |
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