Analysis on the overinvestment behavior based on a real option

Science Research Management ›› 2009, Vol. 30 ›› Issue (5): 111-116 .

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Analysis on the overinvestment behavior based on a real option

Yang Junmin1, Cao Zhiguang2

(1.Shanghai Institute of Foreign Trade, Shanghai 201600, China;
2. School of Finance, Shanghai University of Finance & Economics, Shanghai 200434, China)

Received:2008-03-06 Revised:2009-01-05 Online:2009-09-20 Published:2009-09-20

Abstract

Abstract: Abstract: Investment opportunity is an option to the enterprise. This option can increase the value of the enterprise. However, the exercise timing will affect the value of this option. While debt financing will bring overinvestment problem, more complicated financing behavior can alleviate the problem. Based on the Mauer-Sarkar model, the conclusion is drawn that proper financing behavior can increase the value of the real option.

Key words: real option, overinvestment, financing behavior

Yang Junmin1, Cao Zhiguang2
. Analysis on the overinvestment behavior based on a real option[J]. Science Research Management, 2009, 30(5): 111-116 .

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Analysis on the overinvestment behavior based on a real option

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