Do firms wait to invest? : an empirical investigation

The paper tests a standard real options model of investment using a data set of listed Dutch manufacturing firms over the period of 1984-1997. The threshold value that triggers investment is based on the historical distribution of the profit process and the risk-adjusted discount rate of the firm. The system Generalized Method of Moments (GMM) estimates show that Dutch firms are on average concerned with the option values of investment opportunities. We explore the arguments why firms would be confronted with higher investment hurdles.

The option to wait to invest and equilibrium credit rationing

Stiglitz and Weiss (1981) show that firms considering risky projects have higher reservation interest rates and hence it is optimal for a bank to reduce loan supply. In this note we show that when the risk involved in an investment will be resolved in the future, investors with riskier projects have a greater return from waiting. More risky projects have lower reservation interest rates and hence there is no motive for banks to ration credit demand

De Nederlandse economie in 1997 en 1998

De Nederlandse economie in 1997 en 199