The Impact of Assets-in-Place on Corporate Financing and Investment Decisions

Bidragets oversatte titel: The Impact of Assets-in-Place on Corporate Financing and Investment Decisions

Saskia Clausen, Christian Riis Flor

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

Abstrakt

In a dynamic setting with asymmetric information we consider firms' debt-equity choice and investment timing. We extend recent research by adding an abandonment option and assets-in-place and we show that these extensions make debt more attractive. This implies, e.g., that mature firms (with larger assets-in-place) mainly use debt financing, whereas young high-growth firms (without assets-in-place) frequently use equity financing and signal their type by early investment. Simulation analyses confirm this and our model is thus able to explain empirical patterns which contradict the static pecking order theory.

Bidragets oversatte titelThe Impact of Assets-in-Place on Corporate Financing and Investment Decisions
OriginalsprogEngelsk
TidsskriftJournal of Banking & Finance
Vol/bind61
Sider (fra-til)64-80
ISSN0378-4266
DOI
StatusUdgivet - 1. dec. 2015

Emneord

  • dynamic investment model
  • asymmetric information
  • debt-equity choice
  • limited liability
  • assets-in-place

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