Investment timing, reversibility, and financing constraints

• Published in: Journal of corporate finance (Amsterdam, Netherlands) Vol. 48; pp. 771 - 796
• Main Authors: Shibata, Takashi, Nishihara, Michi
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.02.2018
• Subjects: Capital structure; Collateral; Investment quantity; Liquidation value; Real options; G33; G32; G13; Investment quantity; Liquidation value; Collateral; Real options; Capital structure

This paper examines the optimal financing and investment decisions problem of a firm that is constrained by an upper limit of debt issuance based on liquidation (collateral) value. Our model provides five new results. First, an upper limit of debt issuance does not always delay corporate investment....