增长期权的执行、创造与资产风险溢价——企业生命周期的视角

doi:10.16381/j.cnki.issn1003-207x.2018.10.001

Abstract

Abstract: The activities of the exercising and creating of growth options jointly drive the evolution of firm lifecycle, and the relative power of the dynamic effects of two activities finally determines the change trend of the risk premium of total assets along with firm lifecycle. Different from the existing literature separately focusing on the roles of the exercising and the creating of growth options, the purpose of this paper is to theoretically demonstrate the combined roles of exercising and creating of growth options in determining the change of risk premium. Two main contributions are made in this paper. First, a unified explanation is provided for the roles of investments including capital expenditure, R&D or M&A in predicting asset returns. Second, an insightfully theoretical implication is shown that the dynamics of growth options can determine the development path of a firm over its lifecycle, and an explanation is given for the existing finding about U-shaped pattern of risk premium over firm lifecycle.
real option model is firstly developed to evaluate a representative firm that will grow into maturity as the exercising of its endowed growth options and can simultaneously create new growth options in both young and mature stages of its lifecycle. Secondly, using the technique of pricing kernel, the dynamic effects of the exercising and creating of growth options on the risk premium for young and mature firms are demonstrated and compared, respectively. Finally, how the combined roles of the gradual exercising of endowed growth options and the continuous creating of new growth options determine the change trend of risk premium over firm lifecycle is analyzed.
Consistent with empirical evidence on the relation between investment and expected stock return, it is found that the exercising of growth options decreases risk premium, while the creating of growth options increases risk premium. A further finding is that the negative effect of the exercising of growth options on risk premium is more pronounced for young firms, while the positive effect of the creating of growth options is more pronounced for mature firms. By combining the effects of two activities, the numerical illustration indicates that the gradual exercising of growth options leads to a downward trend of risk premium, but there may exist a U-shaped change of risk premium for firms being able to create continuously new growth options in the mature stage of their lifecycle.

Key words: firm lifecycle, growth options, option exercise, option creation, risk premium

CLC Number:

F830.91

LI Zhun, LI Qiang, ZENG Yong. The Exercise and Creation of Growth Options and Risk Premium: From the Perspective of Firm Lifecycle[J]. Chinese Journal of Management Science, 2018, 26(10): 1-9.

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The Exercise and Creation of Growth Options and Risk Premium: From the Perspective of Firm Lifecycle

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