Expropriation risk, investment decisions and economic sectors

Javier Población
Authors registered in the RePEc Author Service: Diana Constanza Restrepo Ochoa

DEE - Working Papers. Business Economics. WB from Universidad Carlos III de Madrid. Departamento de Economía de la Empresa

Abstract: We build a Real Options model to assess the importance of private provisionand the impact of expropriation risk on investment timing, investmentvolumes, governmental costs and social welfare. We consider two types ofbusinesses (essential and non essential businesses) and two stages (operatingand investment opportunities), and answer questions regarding three maintopics: the firm's reaction to expropriation risk, the government drivers toexpropriate, and the costs this generates in terms of welfare. We find thatthe firm makes suboptimal investment decisions. When we endogenize thereputational costs of expropriation, results show that the decision of the governmentregarding the level of political risk will largely depend on the typeof business. However, in terms of welfare it is never optimal to expropriate

Keywords: Expropriation; risk; Expropriation; Option; Investment; option; Abandonment; option; Costs; of; expropriation (search for similar items in EconPapers)
JEL-codes: G38 H80 (search for similar items in EconPapers)
Date: 2014-09
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://e-archivo.uc3m.es/rest/api/core/bitstreams ... 4201a53964ce/content (application/pdf)

Related works:
Journal Article: Expropriation risk, investment decisions and economic sectors (2015)
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:cte:wbrepe:wb142309

Access Statistics for this paper

More papers in DEE - Working Papers. Business Economics. WB from Universidad Carlos III de Madrid. Departamento de Economía de la Empresa
Bibliographic data for series maintained by Ana Poveda ().