Impact of Uncertainty and Liquidity to the Value of an Investment Option of a Company
Date Issued
2015
Date
2015
Author(s)
Lin, Yong-Ran
Abstract
In this thesis, I will analyze the dynamic investment decision of a firm subject to an endogenous financing constraint. The threat of future funding shortfalls lowers the value of the firm’s timing options and encourages acceleration of investment beyond the first-best optimal level. As well as highlighting another way by which capital market friction can distort investment behavior, this result implies that 1. The sensitivity of investment to cash flow can be greatest for high-liquidity firms. 2. Greater uncertainty has an ambiguous effect on investment.
Subjects
dynamic investment decision
liquidity
uncertainty
Type
thesis
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ntu-104-R02724077-1.pdf
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