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The economic value of flexibility when there is disagreement

Boot, Arnoud W. A.; Thakor, Anjan V. - 2002

We develop an economic theory of “flexibility”, which we interpret as the discretion orability to make a decision that others disagree with. We show that flexibility is essentiallyan option for the decisionmaker, and can be valued as such. The value of the flexibilityoption is decreasing in...

Persistent link: https://www.econbiz.de/10011332819

Disagreement and flexibility : a theory of optimal security issuance and capital structure

Boot, Arnoud W. A.; Thakor, Anjan V. - 2002

’s optimal security-issuance choice trades off the flexibilitybenefit of equity against the now-familiar debt tax shield, and the … financed. Debt offers little flexibility relativeto equity. However, the flexibility offered by equity depends on the extent to … ofthis theory of capital structure evolution is that optimal capital structure is essentiallydynamic, and depends on the firm …

Persistent link: https://www.econbiz.de/10011332820

Go public or stay private : a theory of entrepreneurial choice

Boot, Arnoud W. A.; Gopalan, Radhakrishnan; Thakor, Anjan V. - 2003

In this paper we analyze an entrepreneur /manager's choice between private and public ownership in a setting in which management needs some elbow room or autonomy to optimally manage the firm. In public capital markets, the corporate governance regime in place exposes the firm to exogenous...

Persistent link: https://www.econbiz.de/10011334339

Is small beautiful? Size effects of volatility spillovers for firm performance and exchange rates in tourism

Chang, Chia-Lin; Hsu, Hui-Kuang; McAleer, Michael - 2013

Persistent link: https://www.econbiz.de/10009724114

Badge of honor or scarlet letter? : unpacking investors' judgment of entrepreneurs' past failure

Zunino, Diego; Praag, Mirjam van; Dushnitsky, Gary - 2017

Research shows that most ventures fail, yet it has devoted limited attention to the consequences of entrepreneursâ€™ past failure for investors' decisions. Our motivating insight is that failure can be due to bad luck, lack of skill or both. Therefore, failure conveys ambiguous information...

Persistent link: https://www.econbiz.de/10011720322

How important are risk-taking incentives in executive compensation?

Dittmann, Ingolf; Yu, Ko-Chia - 2009

This paper investigates whether observed executive compensation contracts are designed to provide risk-taking incentives in addition to effort incentives. We develop a stylized principal-agent model that captures the interdependence between firm risk and managerial incentives. We calibrate the...

Persistent link: https://www.econbiz.de/10011378949

Acquisitions as a real options bidding game

Smit, Han T. J.; Berg, Ward A. van den; De Maeseneire, … - 2005

This paper uses a unified treatment of real options and game theory to examine value appropriation in takeovers within a competitive environment of imperfect information. The integrated model considers a potential target as a shared real option on a bundle of resources. Competing potential...

Persistent link: https://www.econbiz.de/10011337396

Disciplining and screening top executives

Dominguez-Martinez, Silvia; Swank, Otto H.; Visser, Bauke - 2006

Boards of directors face the twin task of disciplining and screening executives. To perform these tasks directors do not have detailed information about executives' behaviour, and only infrequently have information about the success or failure of initiated strategies, reorganizations, mergers...

Persistent link: https://www.econbiz.de/10011349199

A Monte Carlo comparison between the free cash flow and discounted cash flow approaches

Akalu, Mehari Mekonnen; Turner, J. Rodney - 2002

One of the debates in the capital budgeting model selection is between the free cash flow and DCF methods. In this paper an attempt is made to compare SVA against NPV model based on Monte Carlo simulations. Accordingly, NPV is found less sensitive to value driver variations and has got higher...

Persistent link: https://www.econbiz.de/10011327539

Evaluating the capacity of standard investment appraisal methods

Akalu, Mehari Mekonnen - 2002

The survey findings indicate the existence of gap between theory and practice of capital budgeting. Standard appraisal methods have shown a wider project value discrepancy, which is beyond and above the contingency limit. In addition, the research has found the growing trend in the use of value...

Persistent link: https://www.econbiz.de/10011327540

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