This paper examines the impact of agency conicts on corporate nancing decisions. Werst build a dynamic contingent claims model in which nancing policy results from a trade-obetween tax benets, contracting frictions, and agency conicts. In our setting, partially-entrenched managers set the rms'...

In the standard real options approach to investment under uncertainty, agents formulate optimal policies under the assumptions of risk neutrality or perfect capital markets. However in most situations, corporate executives face incomplete markets either because they receive compensation packages...

In the standard real options approach to investment under uncertainty, agents formulate optimal policies under the assumptions of risk neutrality or perfect capital markets. Although the assumptions of risk neutrality or market completeness are crucial to the implications of the approach, they...

Theories of investment suggest that the option value of waiting to invest is significant in many branches of economics, where investment is irreversible. The existing literature has generally failed to account for the general equilibrium feedback effects of lumpy investments on optimal...

Companies' investments in research and development (R&D) are usually associated with better growth opportunities incorporated in the firms' market valuation. This study focuses on the question how does the firms' market value attributable to R&D investments depend on the firms' ability to employ...

As early as the 1970s, European Union (EU) member countries implemented rulesto coordinate insurance markets and regulation. However, with the more recentmovement toward a general single EU market, financial services regulation hastaken on new meaning and priority. Solvency I regulations went...

We conduct a laboratory experiment to study whether people in-tuitively use real-option strategies in a dynamic investment setting.The participants were asked to play as an oil manager and make pro-duction decisions in response to a simulated mean-reverting oil price.Using cluster analysis,...

This paper examines the effects of capital gains taxation on firms’ investmentand financing decisions. We develop a real options model in which the timing ofinvestment, the decision to default, and the firm’s capital structure are endogenouslyand jointly determined. Our analysis demonstrates...

This paper examines the effects of capital gains taxation on firms’ investmentand financing decisions. We develop a real options model in which the timing ofinvestment, the decision to default, and the firm’s capital structure are endogenouslyand jointly determined. Our analysis demonstrates...

This paper develops a real options framework to analyze the behavior of stock returns in mergers and acquisitions. In this framework, the timing and terms of takeovers are endogenous and result from value-maximizing decisions. The implications of the model for abnormal announcement returns are...