We develop a dynamic investment options model with optimal capital structure and evaluate the effect of time-to-build on firm value and leverage choices. With time-to-build the firm increases initial leverage in order to reduce the impact of delayed cash flows resulting from time-to-build. The impact of time-to-build is more severe the higher the revenue volatility, competitive erosion and investment costs and when the firm issues long-term debt. Time-to-build is shown to have a substantial impact on firm values for plausible parameter values
E. Agliardi, Koussis N. (2013). Optimal capital structure and the impact of time-to-build. FINANCE RESEARCH LETTERS, 10(3), 124-130 [10.1016/J.frl.2013.02.002].
Optimal capital structure and the impact of time-to-build
AGLIARDI, ELETTRA;
2013
Abstract
We develop a dynamic investment options model with optimal capital structure and evaluate the effect of time-to-build on firm value and leverage choices. With time-to-build the firm increases initial leverage in order to reduce the impact of delayed cash flows resulting from time-to-build. The impact of time-to-build is more severe the higher the revenue volatility, competitive erosion and investment costs and when the firm issues long-term debt. Time-to-build is shown to have a substantial impact on firm values for plausible parameter valuesI documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
