On the Role of External Financing Costs in Optimal Investment Decisions
| Autor: | Mohamed Belhaj, Nataliya Klimenko |
|---|---|
| Přispěvatelé: | Lai Tong, Charles, Groupement de Recherche en Économie Quantitative d'Aix-Marseille (GREQAM), École des hautes études en sciences sociales (EHESS)-Aix Marseille Université (AMU)-École Centrale de Marseille (ECM)-Centre National de la Recherche Scientifique (CNRS), École Centrale de Marseille (ECM)-École des hautes études en sciences sociales (EHESS)-Centre National de la Recherche Scientifique (CNRS)-Aix Marseille Université (AMU) |
| Jazyk: | angličtina |
| Rok vydání: | 2012 |
| Předmět: |
real options
investment intensity debt issuance costs credit constraints debt issuance costs real options jel:G31 Real options investment intensity debt issuance costs credit constraints credit constraints [SHS.ECO]Humanities and Social Sciences/Economics and Finance [SHS.ECO] Humanities and Social Sciences/Economics and Finance jel:G32 jel:G33 investment intensity |
| Popis: | This paper brings into focus a link between the investment and financing decisions of a firm which has an access to costly debt financing. Our analysis shows that lump-sum debt issuance costs play a prominent role in a determination of the optimal investment strategy. Faced with larger lump-sum debt issuance costs, a firm will optimally set up a higher-scale investment project in order to "compensate" dead-weight financing costs by higher return. Moreover, in the presence of lump-sum debt issuance costs, the optimal investment scale of financially constrained firms exhibits an inverted U-shaped relationship with the firm's borrowing capacity, so that relatively more/less constrained firms will realize smaller investment projects, whereas firms with an intermediate borrowing capacity will undertake larger investment. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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