Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/75817
Authors: 
Scarpa, Carlo
Panteghini, Paolo
Year of Publication: 
2001
Series/Report no.: 
CESifo Working Paper 417
Abstract: 
This paper addresses the issue of how regulatory constraints affect firm's investment choices when the firm has the option to delay investment. The RPI-x rule is compared to a profit sharing rule, which increases the x factor in case profits go beyond a given level. It is shown that these rules are identical in their impact on investment choices, in that the change in the option value exactly compensates the change in the “direct“ profitability of investment. The result is then analysed in the light of option theory and explained on the basis of the “bad news principle“.
JEL: 
L51
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.