Real Options in a Dynamic Agency Model, with Applications to Financial Development, Ipos, and Business Risk

35 Pages Posted: 5 Nov 2007 Last revised: 15 Aug 2010

See all articles by Thomas Philippon

Thomas Philippon

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER)

Yuliy Sannikov

University of California, Berkeley - Department of Economics; Princeton University - Department of Economics

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Date Written: November 2007

Abstract

We study investment options in a dynamic agency model. Moral hazard creates an option to wait and agency conflicts affect the timing of investment. The model sheds light, theoretically and quantitatively, on the evolution of firms' dynamics, in particular the decline of the failure rate and the decrease in the age of IPOs.

Suggested Citation

Philippon, Thomas and Sannikov, Yuliy, Real Options in a Dynamic Agency Model, with Applications to Financial Development, Ipos, and Business Risk (November 2007). NBER Working Paper No. w13584. Available at SSRN: https://ssrn.com/abstract=1027203

Thomas Philippon (Contact Author)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Yuliy Sannikov

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

Princeton University - Department of Economics

Princeton, NJ 08544-1021
United States

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