Investment busts, reputation, and the temptation to blend in with the crowd

• 成果类型: Article
• 署名作者: Grenadier, Steven R.; Malenko, Andrey; Strebulaev, Ilya A.
• 署名单位: Stanford University; National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2013.09.002
• 发表日期: 2014
• 页码: 137-157
• 关键词: Abandonment; Real options; signaling; asymmetric information; reputation

摘要

We provide a real-options model of an industry in which agents time abandonment of their projects in an effort to protect their reputations. Agents delay abandonment attempting to signal quality. When a public common shock forces abandonment of a small fraction of projects irrespective of agents' quality, many agents abandon their projects strategically even if they are unaffected by the shock. Such blending in with the crowd effect creates an additional incentive to delay abandonment ahead of the shock, leading to accumulation of living dead projects, which further amplifies the shock. The potential for moderate public common shocks often improves agents' values. (C) 2013 Elsevier B.V. All rights reserved.