The Delaying Effect of Financing Constraints on Investment

Mindel Van De Laar and Wilko Letterie

Bulletin of Economic Research, 2004, vol. 56, issue 3, 271-281

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.

Date: 2004
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https://doi.org/10.1111/j.1467-8586.2004.00202.x

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