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The value of real options investments under uncertainty : The case of the Korean economic crisis

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  • The value of real options investments under uncertainty
  • Lee, Seung-Hyun; Makhija, Mona; Paik, Yongsun
  • Elsevier


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Title The value of real options investments under uncertainty
Similar Titles
Sub Title

The case of the Korean economic crisis

Material Type Articles
Author(English)

Lee, Seung-Hyun; Makhija, Mona; Paik, Yongsun

Publisher

[Amsterdam, Netherlands]:Elsevier

Date 2008-01
Journal Title; Vol./Issue Journal of World Business:vol. 43
Pages 20
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < General
Holding Research Gate

Abstract

Real options investments are expected to take their greatest value during periods of abnormally high uncertainty. This important proposition of real options is empirically difficult to test, since one cannot readily find such well-defined unanticipated periods affecting large numbers of firms. We attempt to address this problem in the real options literature by focusing on the case of Korean firms during the Korean economic crisis in 1998. The largely unanticipated nature of this Korean economic crisis, along with its highly uncertain implications, created the conditions of a ‘‘natural experiment’’ for investigating this issue. Our findings support the notion that real options investments provide value under uncertainty. We also find support for the notion that the value of real options varies with the level of uncertainty faced by the firm.