The Effect of Common Ownership on Investment Decisions under Uncertainty

You Don’t Know What You Don’t Know: Improvements in Investment Efficiency Prior to a Mandated Accounting Change

“…Rational managers will only commit to an uncertain investment project in the current period if the expected marginal value of an investment exceeds the cost of investment plus the option value of delaying investment to the future (Arrow and Fisher 1974). Consequently, managers facing uncertainty under-invest relative to the neoclassical optimal level (see link 3 in Figure 1; Arif, Marshall, and Yohn 2016;Baek, Kwon, Lynch 2021).…”