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The Delaying Effect of Financing Constraints on Investment
Author(s) -
Van De Laar Mindel,
Letterie Wilko
Publication year - 2004
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/j.1467-8586.2004.00202.x
Subject(s) - investment (military) , economics , value (mathematics) , finance , microeconomics , investment decisions , simple (philosophy) , business , monetary economics , behavioral economics , computer science , machine learning , politics , political science , law , philosophy , epistemology
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.