Irreversible investment under uncertainty and the threat of bankruptcy

Authors
Vercammen, J
Citation
J. Vercammen, Irreversible investment under uncertainty and the threat of bankruptcy, ECON LETT, 66(3), 2000, pp. 319-325
Citations number
9
Categorie Soggetti
Economics
Journal title
ECONOMICS LETTERS
ISSN journal
01651765 → ACNP
Volume
66
Issue
3
Year of publication
2000
Pages
319 - 325
Database
ISI
SICI code
0165-1765(200003)66:3<319:IIUUAT>2.0.ZU;2-#
Abstract
The firm-level theory of irreversible investment under uncertainty is exten ded to account for bankruptcy. With a sufficiently large risk of bankruptcy , firms prefer to defer their investment decision to a later date. Simulate d option values reach as high as 30 percent. (C) 2000 Elsevier Science S.A. All rights reserved. JEL classification: D81; D92.