Optimal Corporate Strategy under Uncertainty
Publication Type
Journal Article
Publication Date
6-2013
Abstract
Within a dynamic setting, optimal corporate strategy management for a multi-division corporation involves restructuring a portfolio of Strategic Business Units (SBUs) periodically so as to maximize the firm's market value. Real option theory has been applied to model and explain managerial flexibility for both project selection and operational decisions. In general, optimal corporate strategy has focused on strategic environments and characteristics of business units rather than on managerial flexibility. In this article, we develop a feasible discrete-time model for optimal corporate strategy that incorporates both endogenous and exogenous factors and is consistent with the value-based criterion for maximizing shareholders’ wealth.
Keywords
optimal corporate strategy, strategic business units, intertemporal capital asset pricing model (ICAPM), real options theory, SBU's market-volatility risk, SBU's state-variable risk, risk-adjusted net present value (RANPV) rule
Discipline
Corporate Finance | Finance and Financial Management
Research Areas
Finance
Publication
Applied Economics
Volume
45
Issue
20
First Page
2877
Last Page
2882
ISSN
0003-6846
Identifier
10.1080/00036846.2012.684791
Publisher
Taylor & Francis (Routledge): SSH Titles
Citation
CHEN, Andrew H.; FABOZZI, Frank J.; and Dashan HUANG.
Optimal Corporate Strategy under Uncertainty. (2013). Applied Economics. 45, (20), 2877-2882.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/4784
Additional URL
https://doi.org/10.1080/00036846.2012.684791