scholarly journals Taxation Under Uncertainty - Problems of Dynamic Programming and Contingent Claims Analysis in Real Option Theory

2002 ◽  
Author(s):  
Rainer Niemann ◽  
Caren Sureth-Sloane
Keyword(s):  
Dynamic Programming ◽  
Real Option ◽  
Contingent Claims ◽  
Claims Analysis ◽  
Contingent Claims Analysis ◽  
Real Option Theory ◽  
Option Theory

Capital Budgeting with Taxes under Uncertainty and Irreversibility / Investitionsplanung mit Steuern bei Unsicherheit und Irreversibilität

2005 ◽  
Vol 225 (1) ◽  
Author(s):  
Rainer Niemann ◽  
Caren Sureth
Keyword(s):  
Dynamic Programming ◽  
Risk Aversion ◽  
Real Option ◽  
Capital Budgeting ◽  
Contingent Claims ◽  
Market Model ◽  
Claims Analysis ◽  
Investment Projects ◽  
Contingent Claims Analysis ◽  
Tax Systems

SummaryThis article investigates the derivation of post-tax investment rules and neutral tax systems under risk neutrality and risk aversion for irreversible investment projects. Integrating taxes into real option theory, it can be shown that the possible approaches dynamic programming and contingent claims analysis yield identical investment rules under risk neutrality. Under risk aversion, contingent claims analysis requires a sophisticated capital market model which is still missing. In contrast, dynamic programming as an individual approach permits explicit investment rules at least in the pre-tax case. After taxes, both approaches fail to reach general solutions. Nevertheless, we succeed in proving neutral tax systems for the first time under risk aversion in the real option context using dynamic programming.

Partially Irreversible Investment Decisions and Taxation under Uncertainty: A Real Option Approach

2002 ◽  
Vol 3 (2) ◽  
pp. 185-221 ◽  
Author(s):  
Caren Sureth
Keyword(s):  
Real Option ◽  
Investment Decisions ◽  
Contingent Claims ◽  
Investment Model ◽  
Option Valuation ◽  
Claims Analysis ◽  
The Real ◽  
Contingent Claims Analysis ◽  
Real Option Approach ◽  
Tax Systems

AbstractThe paper applies contingent claims analysis in a real option investment model in order to investigate taxation's influence on investor's decisions under uncertainty. The results show the distortion from realistic-type tax systems, allow to identify a tax-induced paradox in option valuation for specific settings and acknowledge the property of investment neutrality of well-known `ideal' tax systems in the context of different degrees of irreversibility. Furthermore, it is clarified that the idea of risk-neutral valuation cannot be adopted by the real option approach in general.

scholarly journals The Impact of Banking Competition on Firm Credit Risk and Leverage

SAGE Open ◽  
2021 ◽  
Vol 11 (4) ◽  
pp. 215824402110615
Author(s):  
Chengxiao Feng ◽  
Zhubo Li ◽  
Zhen Peng
Keyword(s):  
Default Risk ◽  
Credit Constraints ◽  
Contingent Claims ◽  
Claims Analysis ◽  
Banking Competition ◽  
Leverage Ratio ◽  
Contingent Claims Analysis ◽  
Credit Risks ◽  
Default Risks ◽  
The Impact

A firm’s default risk is closely related to its macrofinancial stability. As financial reform deepens, banking competition may ease firms’ credit constraints, encouraging them to increase their leverage and default risks. This study uses contingent claims analysis to examine firms’ asset–liability ratio and default distance. We find that companies have low leverage and low overall default risks. Moreover, a pro-cyclical effect exists between leverage and economic growth. As banking competition becomes more intense, the default risk decreases, but firms’ leverage ratio rises significantly. The impact is more prominent for highly leveraged firms. Our findings also indicate that utilizing the contingent claims analysis method to measure firms’ leverage and default risks provides more accurate results. Moreover, we provide empirical evidence of the impact of banking competition on firms’ leverage and credit risks. The results suggest that enhancing financial competition has a positive effect on easing credit constraints and reducing default risks.

Media multiplicity and collaborative innovation with suppliers: evidence from China

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ruihong Liu ◽  
Yuanqiong He ◽  
Xiu-Hao Ding ◽  
Jianhong Li
Keyword(s):  
Real Option ◽  
Communication Media ◽  
National Bureau ◽  
Content Type ◽  
Real Option Theory ◽  
Collaborative Innovation ◽  
Using Data ◽  
Option Theory ◽  
Enterprise Survey

PurposeBased on media choice theories and real option theory, this study aims to explore the role of communication media portfolio in achieving collaborative innovation with suppliers.Design/methodology/approachUsing data of the Study of Competitiveness, Technology and Firm Linkages 2002 collected by the World Bank and the Enterprise Survey Organization of the Chinese National Bureau of Statistics, this study employed logit model to test the hypotheses. Moreover, some robustness analyses were conducted.FindingsThis study suggests that media multiplicity increases the probability for a firm to achieve collaborative innovation with suppliers on the basis of real option theory. Furthermore, distance from the suppliers and relationship formality make media multiplicity further important in collaborative innovation with suppliers.Originality/valueThrough investing how communication media portfolio affecting collaborative innovation with suppliers and the contingency factors, this study complements existing studies just concentrating on supplier capabilities, relationships with suppliers and characteristics of supplier network. Moreover, this study contributes in the information system field by exploring the role of media portfolio rather than individual media.

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