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The Effect of Uncertainty on Investment, Hiring, and R&D : Causal Evidence from Equity Options
Stein, Luke C.D. - 2014
: capital investment, hiring, research and development, and advertising. We find that uncertainty depresses capital investment … literature emphasizing that long investment lags create valuable real put options which offset the effects of call options lost … roughly a third of the fall in capital investment and hiring that occurred in 2008-10 …
Persistent link: https://www.econbiz.de/10013069505
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Investment Frictions versus Financing Frictions
Kobayashi, Takao - 2009
Bertola/Caballero (1994) and Abel/Eberly (1996) extended Jorgenson's classical model of firms' optimal investment. By … introducing investment frictions, they were able to capture the role of future anticipations in investment decisions as well as … the lumpy and intermittent nature of investment dynamics. We extend Jorgenson's model to the other direction of financing …
Persistent link: https://www.econbiz.de/10013157853
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Understanding the effect of advertising on stock returns and firm value : theory and evidence from a structural model
Vitorino, Maria Ana - 2011
investment-based model to understand the impact of advertising expenditures on stock returns and firm value. In addition, by … interpreting advertising expenditures as an investment in brand capital, the approach in this paper provides a novel way to measure …
Persistent link: https://www.econbiz.de/10009356642
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A Model of Endogenous Debt Maturity with Heterogeneous Beliefs
Darst, Matthew - 2020
This paper studies how investor heterogeneity determines equilibrium debt maturity in a model with default. The traditional representative investor assumption is a special case where a weak form of the Modigliani-Miller theorem holds; allocations with either all long- or all short-term debt are...
Persistent link: https://www.econbiz.de/10012855719
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Endogenous Financial Constraints and Innovation
Lahr, Henry - 2020
We investigate which indicators of a firm's innovation activities are associated with financial constraints and analyse the nature and direction of causal links between innovation and financial constraints. By estimating simultaneous bivariate probit models on data from the UK Innovation...
Persistent link: https://www.econbiz.de/10012850417
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A Model of Endogenous Debt Maturity with Heterogeneous Beliefs
Darst, Matthew; Refayet, Ehraz - 2020
time, thereby increasing investment and output. By contrast, a single maturity, either all long- or short-term, will be … priced by investors less willing to hold risk, which reduces investment and output. The model provides a novel explanation …
Persistent link: https://www.econbiz.de/10014121170
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Leasing, Uncertainty, and Financial Constraint
Zhang, Na - 2012
Leasing is one of the most important sources of external finance to corporate firms. This paper develops a dynamic model to investigate the role of uncertainty and financial constraint in understanding the leasing decisions of corporate firms. The model predicts that firms with high uncertainty...
Persistent link: https://www.econbiz.de/10013109337
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Dynamic Risk Management
Rampini, Adriano A. - 2013
Both financing and risk management involve promises to pay that need to be collateralized, resulting in a financing versus risk management trade-off. We study this trade-off in a dynamic model of commodity price risk management and show that risk management is limited and that more financially...
Persistent link: https://www.econbiz.de/10013092740
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Contraction Options : Implications for the Profitability-Return Relation and Momentum Profits
Shim, Kyung Hwan - 2015
We develop a firm valuation model with repeated expansion and contraction options to show operating profitability is a proxy for time-varying systematic risk. Relative to riskier assets, the proportionate value of contraction options increase as profitability falls, lowering the firm beta....
Persistent link: https://www.econbiz.de/10013026825
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Risk Sharing Markets and International Trade – A Comment
Lehrbass, Frank - 2014
We consider an exporting firm facing FX risk. We show that FX options are not used for hedging, if there is no ex-post production flexibility. Hence, in the standard setting of having no ex-post optionality, hedging with forwards is the best choice.The value of FX options for hedging arises as...
Persistent link: https://www.econbiz.de/10013060727