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Effects of Reversibility on Investment Timing and Quantity Under Asymmetric Information

In: RECENT ADVANCES IN FINANCIAL ENGINEERING 2014 Proceedings of the TMU Finance Workshop 2014

Author

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  • Xue Cui
  • Takashi Shibata

Abstract

The paper examines how changes in reversibility of investment affect a firm's investment timing and quantity strategies, in the presence of manager's private information. We find that even under asymmetric information, higher reversibility of investment decreases the investment trigger. More importantly, the quantity under asymmetric information is no longer independent of the degree of reversibility of investment, but increases with it.

Suggested Citation

  • Xue Cui & Takashi Shibata, 2016. "Effects of Reversibility on Investment Timing and Quantity Under Asymmetric Information," World Scientific Book Chapters, in: Masaaki Kijima & Yukio Muromachi & Takashi Shibata (ed.), RECENT ADVANCES IN FINANCIAL ENGINEERING 2014 Proceedings of the TMU Finance Workshop 2014, chapter 5, pages 95-106, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814730778_0005
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    Cited by:

    1. Cui, Xue & Shibata, Takashi, 2017. "Investment strategies, reversibility, and asymmetric information," European Journal of Operational Research, Elsevier, vol. 263(3), pages 1109-1122.

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