Real Options and Managerial Compensation in Asymmetric Duopoly

• Main Authors: Wen, Wei-Che, 顏唯哲
• Other Authors: Huang, Hsing-Hua
• Format: Others
• Language: zh-TW
• Published: 2015
• Online Access: http://ndltd.ncl.edu.tw/handle/09864294018563847937

碩士 === 國立交通大學 === 財務金融研究所 === 103 === This article builds a real option model to investigate the investment and financing decisions in an asymmetric duopoly where the two firms’ managers are in charge of decisions and can be compensated with different fixed salaries and hold different fractions of firms’ shares. The managers’ investment and financing decisions are determined by the following three mechanisms. The first is the asymmetry between the two managers’ fixed salaries. The manager tends to invest earlier if he or she is compensated with higher fixed salary. The second is the asymmetry between the fractions of the two managers’ shares. If the firms’ managers’ fractions of shares are very similar, the two firms are more symmetric given that the two managers are compensated with the same level of fixed salary. The manager who makes a preemptive investment tends to declare bankruptcy earlier. When the two managers’ fixed salaries are different, the degree of the competition between the two firms can be enlarged or be reduced. It is therefore required a larger or smaller asymmetry between the fraction of the two manager’s shares to make up the asymmetry between the two managers’ fixed salaries. The third is the relative sizes between the previous and reservation incomes and managers’ fixed salaries. When the previous and reservation incomes are larger (smaller) than the manager’s fixed salary, the manager trends to invest earlier (later) as the fraction of the manager’s shares increases.