The use of real option theory in Scandinavia's largest companies

Anders Horn, Frode Kjærland, Peter Molnár and Beate Wollen Steen

International Review of Financial Analysis, 2015, vol. 41, issue C, 74-81

Abstract: We survey the CFOs of 1500 largest companies from Norway, Denmark and Sweden (500 from each country) about their capital budgeting process with focus on the real option analysis. Only 6% of the respondents use real options, whereas the most used technique, the net present value, is used by 74% of the CFOs. Real options are more often used by companies in the energy and biotech sectors, large companies and companies with high capital and R&D expenditures. Lack of familiarity is the most important reason for non-use, where 70% of respondents report to not be familiar with real option concepts and techniques. For the respondents familiar with the framework, the complexity of real options is the main hinder for implementation.

Keywords: Real options; Capital budgeting; Survey (search for similar items in EconPapers)
JEL-codes: G31 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:41:y:2015:i:c:p:74-81

DOI: 10.1016/j.irfa.2015.05.026

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