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...

We present a real-options model of takeovers and disinvestment in declining industries. As product demand declines, a first-best closure level is reached, where overall value is maximized by closing the firm and releasing its capital to investors. Absent takeovers, managers of underleveraged...

We develop a dynamic agency model where payout, investment and financing decisions are made by managers who attempt to maximize the rents they take from the firm, subject to a capital market constraint. Managers smooth payout in order to smooth their flow of rents. Total payout (dividends plus...

We present a theory of capital investment and debt and equity financing in a real-options model of a public corporation. The theory assumes that managers maximize the present value of their future compensation (managerial rents), subject to constraints imposed by outside shareholders' property...

Traditional theories of capital structure do not explain the puzzling phenomena of zero-leverage firms and negative net debt ratios. We develop a theory where firms adopt a net debt target that acts as a balancing variable between equityholders and managers. Negative (positive) net debt occurs...

We develop a dynamic agency model where payout, investment and financing decisions are made by managers who attempt to maximize the rents they take from the firm, subject to a capital market constraint. Managers smooth payout in order to smooth their flow of rents. Total payout (dividends plus...