multinationals. Multinational firms are more exposed to risk: following a negative shock, they are reluctant to exit the foreign … market because they would forgo the option premium (sunk cost) that they paid to become multinationals. The theory provides a …

based on introducing stochastic idiosyncratic cash flow risk into an equity valuation model of firms with growth options …. Within our model, a firm's systematic risk depends on the delta of its growth option. The growth option's delta is lower when … idiosyncratic volatility rises, driving down the firm's systematic risk and hence its expected return - firms with higher …