Home

COVID-19 Pandemic Corporate Investment and the Real Option Value

Abstract Views
12
Author
Chao Yan Ziyi Zhang Yi Feng
Category
Financial
Date Posted
2022/09/22
Date Retrieved
2022/09/22
Date Revised
Date Written
2022/09/22
Description
The outbreak of COVID-19 has a huge negative impact on the firms’ business activities. This paper investigates the effects of COVID-19 pandemic on corporate investment and firm value from the real option perspective. Based on the real-option based model (ROM) proposed by Zhang (2000) we find that COVID-19 crisis accelerates low-profitability firms to reduce investment scale and exercise put options timely thereby the value of put options is increased. This finding mainly exists in areas where the COVID-19 pandemic is worse and firms that have not received government subsidies related to COVID-19. We also find that the value of put options is more pronounced for non-state-owned enterprises and firms with higher internal control quality. However we do not find the change of growth option value of high-profitability firms during the COVID-19 which indicates that it is difficult for high-profitability firms to grasp the investment expansion opportunities under the COVID-19 pandemic. Our st
Downloads
5
Exports
0
JEL Classifications
G12 G30 M41
Keywords
COVID-19; Corporate Investment; Real Option Value; Put Options
News Mentions
0
Pages
50
Random
36
Readers
0
Shares and Likes
0
Tweets
0
URL
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4227006
TOP