Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments March 12, 2010 erstellt
Description:
I study the impact of capital market imperfections on the exercise of a real option. An entrepreneur has private information about a venture for which she seeks outside funding. An initial investment gives access to a continuous flow of information about the project. The duration of that experimentation phase is used to signal quality and investment may be delayed relative to the first best. Investors use milestone contracts, and the entrepreneur is granted stock options with a vesting period or receives a compensation in case of failure. The pay-performance sensitivity of her compensation is correlated with risk taking. The initial mix of inside and outside financing effects the timing of future investment, in line with empirical evidence