NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Paul Décaire

University of Pennsylvania
3620 Locust Walk, Suite 2400
Philadelphia, PA 19104

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Institutional Affiliation: University of Pennsylvania

NBER Working Papers and Publications

February 2019Real Option Exercise: Empirical Evidence
with Erik P. Gilje, Jérôme P. Taillard: w25624
We study when and why firms exercise real options. Using detailed project-level investment data, we find that the likelihood that a firm exercises a real option is strongly related to peer exercise behavior. Peer exercise decisions are as important in explaining exercise behavior as variables commonly associated with standard real option theories, such as volatility. We identify peer effects using localized exogenous variation in peer project exercise decisions and find evidence consistent with information externalities being important for exercise behavior.
 
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