NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Real Options in a Dynamic Agency Model, with Applications to Financial Development, IPOs, and Business Risk

Thomas Philippon, Yuliy Sannikov

NBER Working Paper No. 13584
Issued in November 2007
NBER Program(s):   CF   EFG

We study investment options in a dynamic agency model. Moral hazard creates an option to wait and agency conflicts affect the timing of investment. The model sheds light, theoretically and quantitatively, on the evolution of firms' dynamics, in particular the decline of the failure rate and the decrease in the age of IPOs.

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