Corporate Governance: A New Limit to Real Options Valuation?*

Henri Philippe ()

Journal of Management & Governance, 2005, vol. 9, issue 2, 129-149

Abstract: Including real options in firms ’ value raises numerous difficulties. Limitations concerning the relevance of option pricing models outside financial markets are the most salient, but carrying out a valuation implies other assumptions, especially on firms’ governance. In particular, assessing whether a real option should be included within a firm’s boundaries and how its value should be shared, is difficult. Most of these issues result from the different property rights on real options: who creates and who can exercise the option? We discuss existing answers to these difficulties and propose a matrix based on property rights to help practitioners decide whether a real option can be valued appropriately or not by real options models. We support our discussion with a case study based on an R&D firm valuation. Copyright Springer 2005

Keywords: Case studies; corporate governance; corporate valuation; R&D; Real options; theory of the firm; D23; D81; G34; L22; O32 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10997-005-4028-7

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