The Delaying Effect of Financing Constraints on Investment

12 Pages Posted: 11 Jul 2004

See all articles by Mindel van de Laar

Mindel van de Laar

University of Maastricht (formerly University of Limburg)

Wilko H. Letterie

Maastricht School of Business and Economics; Maastricht University

Abstract

We develop a simple model in which a firm considers a number of investment projects. Because of limited financial resources, the firm can undertake at most one project. In line with the literature on real options we stress features like irreversibility, uncertainty and the possibility of postponing the investment decision and show under which conditions limited availability of funds tends to increase the value of waiting.

Suggested Citation

van de Laar, Mindel and Letterie, Wilko H., The Delaying Effect of Financing Constraints on Investment. Available at SSRN: https://ssrn.com/abstract=559746

Mindel Van de Laar (Contact Author)

University of Maastricht (formerly University of Limburg) ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

Wilko H. Letterie

Maastricht School of Business and Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
31-43-3883645 (Phone)
31-43-3213137 (Fax)

Maastricht University

P.O. Box 616
Maastricht, 6200MD
Netherlands

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