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Corporate Finance and the (In)efficient Exercise of Real Options

Author

Listed:
  • Bart M. Lambrecht

    (Lancaster University Management School, UK)

  • Grzegorz Pawlina

    (Lancaster University Management School, UK)

Abstract

This paper considers real options within a continuous-time corporate finance context. We analyze whether these real options are exercised effciently, and what the underlying sources of inefficiency are. In particular we consider the role of incomplete information, competition, search costs and financing constraints on investment decisions. We also analyze the stockholder-bondholder and the manager-stockholder agency problems, and their effect on a firm's investment and closure policies.

Suggested Citation

  • Bart M. Lambrecht & Grzegorz Pawlina, 2010. "Corporate Finance and the (In)efficient Exercise of Real Options," Multinational Finance Journal, Multinational Finance Journal, vol. 14(3-4), pages 189-217, September.
    • Handle: RePEc:mfj:journl:v:14:y:2010:i:3-4:p:189-217
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    References listed on IDEAS

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    More about this item

    Keywords

    real options; product market competition; costly search; financing constraints; agency problem;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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