Abstract: Investment decision is the classical problem in corporate finance, which studied in the literature. Myers(1997) find that in contrast to pure equity finance, leverage finance results in underinvestment problem due to delaying investment. While, Jensen and Meckling(1976)leverage finance leads to overinvestment problem because of accelerating investment. After that, a large number of articles study the investment problem of corporate under different situations, e.g. Mauer and Sarkar(2005), Hackbarth and Mauer(2012) and Sundaresan et al.(2015) among many others. The above literature assume that the agent is time-consistent preferences, i.e. the discount rate is constant. However, in fact, the agent is time-inconsistent preferences (see Thaler and Shafrin, 1981). The factor is incorporated dynamic policies about economic and finance problem, for example, Grenadier and Wang (2007), Liu and Yang (2015), Tian (2016) and so on. There is no paper considering the impact of time-inconsistent preferences on investment decision in a growth option model. Based on this, the investment decisions under time-inconsistent preferences is explored in this paper.

Key words: time-inconsistent preferences; sophisticated entrepreneur; naive entrepreneur; dynamic investment