Effects of Reversibility on Investment Timing and Quantity Under Asymmetric Information

Xue Cui and Takashi Shibata ()

Chapter 5 in Recent Advances in Financial Engineering 2014:Proceedings of the TMU Finance Workshop 2014, 2016, pp 95-106 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The paper examines how changes in reversibility of investment affect a firm's investment timing and quantity strategies, in the presence of manager's private information. We find that even under asymmetric information, higher reversibility of investment decreases the investment trigger. More importantly, the quantity under asymmetric information is no longer independent of the degree of reversibility of investment, but increases with it.

Keywords: Financial Engineering; Mathematical Finance; Money & Banking; Risk Management; Real Option; Corporate Finance; Computational Finance (search for similar items in EconPapers)
Date: 2016
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