Real Options in a Dynamic Agency Model, with Applications to Financial Development, IPOs, and Business Risk
34 Pages Posted: 3 Nov 2008
Date Written: October 2007
We study investment options in a dynamic agency model. Moral hazard creates anoption to wait and agency conflicts affect the timing of investment. The model shedslight, 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.
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