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- W2065692502 abstract "This paper develops a tractable real options framework to analyze the effects of asymmetric information on firms' investment decisions when firms issue equity to finance investment. We assume that firm insiders exactly know the firms' growth prospects, but outside investors do not know. Our analysis shows that, under equity financing, the corporate insiders can signal their private information to outside investors using the timing of investment and avoid selling underpriced equity. It is demonstrated that informational asymmetry significantly erodes the option value of waiting to invest and leads firms with good growth prospects to speed up investment. Comparative static analysis shows that the model is consistent with the available empirical evidence." @default.
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- W2065692502 date "2010-08-12" @default.
- W2065692502 modified "2023-09-24" @default.
- W2065692502 title "Dynamic Investment under Asymmetric Information" @default.
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- W2065692502 doi "https://doi.org/10.4304/jcp.5.8.1248-1255" @default.
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