The Delaying Effect of Financing Constraints on Investment |
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| Authors: | Mindel van de Laar Wilko Letterie |
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| Institution: | Department of Economics, Maastricht University, the Netherlands and Department of Organization and Strategy, BIRC, Maastricht University, the Netherlands |
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| Abstract: | We develop a simple model in which a firm considers a number of investment projects. Because of limited financial resources, the firm can undertake at most one project. In line with the literature on real options we stress features like irreversibility, uncertainty and the possibility of postponing the investment decision and show under which conditions limited availability of funds tends to increase the value of waiting. |
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| Keywords: | financing constraints irreversible investment uncertainty |
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