The Least-Squares Monte Carlo model (LSM model) has emerged as the derivative valuation technique with the greatest impact in current practice. As with other options valuation models, the LSM algorithm was initially posited in the field of financial derivatives and its extension to the realm of...

This paper provides a non-technical presentation of the theoretical foundations of corporate financial decision making and the net present value (NPV) rule. Our objective is to show that the concepts of value and value creation arise from a single, unified framework that is firmly rooted in...

We analyze a unique dataset from a survey of CFOs of diversified firms to examine four areas of diversification and internal capital markets: causes and financing effects of corporate diversification, capital budgeting processes, capital investment methods, and reallocation policies in internal...

This paper presents evidence of the negative combined effect of financial constraints and real options on corporate investment. Using panel data on public companies functioning in developed countries, the authors prove that with increasing uncertainty surrounding a firm, the real options effect...

This paper aims to clarify how contingent convertible bond (CCB) as a debt financing instrument affects the firm's investment policy, agency cost of debt and capital structure. We consider two different conversion thresholds of CCB: One is endogenous and the other is exogenous. We find that...

We examine how firm and country heterogeneity shape the response of corporate investment in emerging markets to changes in global interest rates and volatility. We test for the presence of (i) a financing channel originating from changes in the costs of external borrowing and (ii) a real options...

We examine the relation between family presence and corporate investment policy. Our analysis centers on two incentives that potentially lead to differences in investment policy between family firms and nonfamily firms: family owners' risk aversion and their real option to invest. Our findings...