EconPapers    
Economics at your fingertips  
 

Investment timing, reversibility, and financing constraints

Takashi Shibata () and Michi Nishihara

Journal of Corporate Finance, 2018, vol. 48, issue C, 771-796

Abstract: This paper examines the optimal financing and investment decisions problem of a firm that is constrained by an upper limit of debt issuance based on liquidation (collateral) value. Our model provides five new results. First, an upper limit of debt issuance does not always delay corporate investment. Second, an upper limit does not affect the determination of investment quantity. Third, an upper limit may change bankruptcy strategies during financial distress via a change of capital structure. Fourth, an upper limit may induce the debt to move from risky to riskless. Fifth, an upper limit always decreases the leverage, credit spread, and default probability.

Keywords: Real options; Investment quantity; Capital structure; Liquidation value; Collateral (search for similar items in EconPapers)
JEL-codes: G13 G33 G32 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119917307538
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:48:y:2018:i:c:p:771-796

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-06-29
Handle: RePEc:eee:corfin:v:48:y:2018:i:c:p:771-796