Real Options and Investment Incentives

✍ Scribed by Professor Dr. Gunther Friedl (auth.)

• Publisher: Springer-Verlag Berlin Heidelberg
• Year: 2007
• Tongue: English
• Leaves: 128
• Edition: 1
• Category: Library

✦ Synopsis

Many large corporations delegate investment decision-making authority to their divisions. Because they are better informed, divisional managers should be able to make better decisions than corporate headquarters. However, they can use this informational advantage to pursue their own interests. The objective of this work is to analyze the problem of delegated decision-making within firms when investment projects are characterized by the possibility to make subsequent decisions after the initial investment decision has been made. By analyzing this question, the monograph combines and unifies two important lines of literature: on the one hand the literature on controlling investment decisions, on the other hand the investment valuation literature.

✦ Table of Contents

Front Matter....Pages I-XIII
Introduction....Pages 1-5
Institutional and Methodological Background for the Analysis of Investment Incentives....Pages 7-36
Capital Rationing as an Incentive Instrument for Growth Options....Pages 37-54
Residual Income as a Performance Measure for Switching Options....Pages 55-71
Residual Income as a Performance Measure in the Presence of Waiting Options....Pages 73-90
Implications and Conclusions....Pages 91-96
Back Matter....Pages 97-119

✦ Subjects

Finance /Banking; Accounting/Auditing