Do firms wait to invest?: an empirical investigation

The paper tests a standard real options model of investment using a data set of listed Dutch manufacturing firms over the period of 1984-1997. The threshold value that triggers investment is based on the historical distribution of the profit process and the risk-adjusted discount rate of the firm. The system Generalized Method of Moments (GMM) estimates show that Dutch firms are on average concerned with the option values of investment opportunities. We explore the arguments why firms would be confronted with higher investment hurdles