We employ a stochastic dominance (SD) approach to analyze the components that contribute to environmental degradation over time. The variables that are considered include countries’ greenhouse gas (GHG) emissions and water pollution. Our approach is based on pair-wise SD tests. First, we study...

We study the decision to preserve diverse species when the value of biodiversity is uncertain, or even affected by ambiguity. Optimal decisions are derived in a real option framework. We find that while calculated risk creates a scope for biodiversity preservation, the presence of ambiguity...

We develop a dynamic two-stage trade-off model with refinancing when earnings are mean reverting, expanding previous theoretical work focusing on non-stationary dynamics. Our model predicts a negative relation between profitability and leverage ratios at refinancing, providing a possible...

We propose an alternative to the standard nonstationary earnings dynamics framework for studying refinancing decisions by building a dynamic two-stage trade-off model with refinancing for firms following mean reverting earnings. The model predicts a negative relation between profitability and...

We develop a dynamic trade-off model with mean-reversion in earnings and a growth option and provide predictions on the impact of long-term profitability, mean reversion speed, volatility of earnings and debt priority structure on firm value, the dynamics of leverage and credit spreads and the...

This paper contributes to the debate on alternative corporate tax schemes, employing a rigorous real option methodology which has never been used to study both liquidation policy and taxation. Different tax systems are considered, according to whether the tax regime is progressive or flat and...

The purpose of the paper is to show that 'catastrophes' can arise in a simple model of the adoption of innovations with increasing returns to adoption. The equilibrium adoption path for two innovations is studied when there are network externalities and heterogeneous potential adopters....