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Corporate Governance: A New Limit to Real Options Valuation?

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Date
2005
Dewey
Economie financière
Sujet
Theory of the firm; Real option; R&D; Corporate valuation; Corporate governance; Case studies
JEL code
O32; L22; G34; D81; D23
Journal issue
Journal of Management and Governance
Volume
9
Number
2
Publication date
06-2005
Article pages
129-149
Publisher
Springer
DOI
http://dx.doi.org/10.1007/s10997-005-4028-7
URI
https://basepub.dauphine.fr/handle/123456789/2529
Collections
  • DRM : Publications
Metadata
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Author
Philippe, Henri
Type
Article accepté pour publication ou publié
Abstract (EN)
Including real options in firms ’ value raises numerous difficulties. Limitations concerning the relevance of option pricing models outside financial markets are the most salient, but carrying out a valuation implies other assumptions, especially on firms’ governance. In particular, assessing whether a real option should be included within a firm’s boundaries and how its value should be shared, is difficult. Most of these issues result from the different property rights on real options: who creates and who can exercise the option? We discuss existing answers to these difficulties and propose a matrix based on property rights to help practitioners decide whether a real option can be valued appropriately or not by real options models. We support our discussion with a case study based on an R&D firm valuation.

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