When Are Real Options Exercised? An Empirical Study of Mine Closings

Alberto Moel

The Review of Financial Studies, 2002, vol. 15, issue 1, 35-64

Abstract: In this article, we study a well-known real option: the opening and closing of mines. Using a new database that tracks the annual opening and closing decisions of 285 developed North American gold mines in the period 1988--1997, we find that the real options model is a useful descriptor of mines' opening and shutting decisions. In addition, we find that the decision whether to shut a mine is related to firm-specific managerial factors not normally considered within a strict real options model. Copyright 2002, Oxford University Press.

Date: 2002
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