Open AccessReal Options in a Dynamic Agency Model, with Applications to Financial Development, IPOs, and Business Risk
Author(s) -
Thomas Philippon,
Yuliy Sannikov
Publication year - 2007
Publication title -
corporate finance: valuation
Language(s) - English
Resource type - Reports
DOI - 10.3386/w13584
Subject(s) - initial public offering , business , agency (philosophy) , business model , finance , business risks , financial system , risk analysis (engineering) , marketing , philosophy , epistemology
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.
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