Volume 14, Numbers 3 & 4 / September/December , Pages 153-317
Corporate Finance and the (In)efficient Exercise of Real Options
Multinational Finance Journal, 2010, vol. 14, no. 3/4, pp. 189-217
Bart M. Lambrecht , Lancaster University Management School, UK    Corresponding Author
Grzegorz Pawlina , Lancaster University Management School, UK

This paper considers real options within a continuous-time corporate finance context. We analyze whether these real options are exercised effciently, and what the underlying sources of inefficiency are. In particular we consider the role of incomplete information, competition, search costs and financing constraints on investment decisions. We also analyze the stockholder-bondholder and the manager-stockholder agency problems, and their effect on a firm's investment and closure policies.

Keywords : real options, product market competition; costly search; financing constraints; agency problem
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