Preventing environmental disasters in investment under uncertainty
| Autor: | Peter M. Kort, Carlos Augusto Fernandes de Oliveira, Maria Lavrutich, Cláudia Nunes |
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| Přispěvatelé: | Econometrics and Operations Research, Research Group: Economics |
| Jazyk: | angličtina |
| Rok vydání: | 2022 |
| Předmět: |
Finance
Economics and Econometrics business.industry Market uncertainty Economics CAPACITY CHOICE Environmental disaster Enterprise value Management Monitoring Policy and Law Investment (macroeconomics) Environmental risk MODEL Chemistry OPTIONS POLLUTION Preventive investment Real options Revenue Profitability index business Biology health care economics and organizations |
| Zdroj: | Environmental and resource economics Environmental & Resource Economics, 83, 199-220. Springer Environmental and Resource Economics |
| ISSN: | 1573-1502 0924-6460 |
| Popis: | The paper considers a firm that has the option to invest in a project with an unknown profitability, which is affected by general market uncertainty. The project has the adverse effect that it can cause environmental damage. In case the firm has the option to undertake preventive investment at the time of market entry, we get that preventive investment is significant when (i) the project revenue is large, (ii) the environmental incidents potentially cause a huge reduction of firm value, and (iii) when preventive investment substantially decreases the probability of environmental damage occurrence. The optimality of such a preventive investment results in a significant delay of the project investment. When the firm has the possibility to invest in the project first and do the preventive investment later, this will accelerate the project investment and will result in a larger preventive investment when it indeed will decide to do that one later. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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