Real Options and Investment Incentives (eBook)

Gunther Friedl (Autor)

eBook Download: PDF

2007 | 2007
XIII, 119 Seiten
Springer Berlin (Verlag)
978-3-540-48268-0 (ISBN)

Infos

This work analyzes 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.

Inhalt

Foreword 5
Acknowledgments 7
Contents 9
List of Abbreviations 12
1 Introduction 13
2 Institutional and Methodological Background for the Analysis of Investment Incentives 18
2.1 Investment Decision Making Within Divisionalized Firms 18
2.2 Instruments for Controlling Capital Investment Decisions 26
2.3 Appropriateness of Various Theoretical Methodologies for the Analysis 43
3 Capital Rationing as an Incentive Instrument for Growth Options 48
3.1 Relevance of Growth Options for R& D-Investments
3.2 Theoretical Results on Capital Budgeting and Growth Options 50
3.3 Analysis of a Model on Incentive Problems for Growth Options 52
3.4 Changing Uncertainty over Investment Costs 61
3.5 Implications for Capital Budgeting Procedures 63
4 Residual Income as a Performance Measure for Switching Options 66
4.1 Residual Income-Based Performance Evaluation and Real Options 66
4.2 Modelling Investment in a Flexible Manufacturing System 69
4.3 Design Alternatives for the Residual Income Performance Measure 72
4.4 Applying the Results to Different Types of Real Options 79
4.5 Implications for the Design of the Residual Income Performance Measure 81
5 Residual Income as a Performance Measure in the Presence of Waiting Options 83
5.1 Relevance of Waiting Options for Investment Decisions 83
5.2 Description of the Basic Model 86
5.3 Comparison of Alternative Residual Income-Based Performance Measures 88
5.4 Extending the Project Life to Many Periods 95
5.5 Advantages and Disadvantages of the Proposed Design Alternatives 98
5.6 Implications for Corporate Practice and Further Research 100
6 Implications and Conclusions 101
6.1 Contribution to the Literature 101
6.2 Limitations of the Analysis 103
6.3 Empirical Implications 104
6.4 Extensions and Further Theoretical Research 106
A Appendix 107
Proofs for Chapter 3 107
Proofs for Chapter 4 115
References 119

Produkt-Details

• Erscheint lt. Verlag: 7.3.2007
• Zusatzinfo: XIII, 119 p. 4 illus.
• Verlagsort: Berlin
• Sprache: englisch
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management
• Themenwelt: Wirtschaft ► Volkswirtschaftslehre
• Schlagworte: Controlling • Dynamic Modelling • Incentives • Investment • Investment Decisions • Investment Valuation • options • Performance • Real Options
• ISBN-10: 3-540-48268-7 / 3540482687
• ISBN-13: 978-3-540-48268-0 / 9783540482680