Optimal Corporate Strategy under Uncertainty

Optimal Corporate Strategy under Uncertainty

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 flex...

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Bibliographic Details
Main Authors: CHEN, Andrew H., FABOZZI, Frank J., Dashan HUANG
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2013
Subjects:
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
Corporate Finance
Finance and Financial Management
Online Access:https://ink.library.smu.edu.sg/lkcsb_research/4784
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Institution: Singapore Management University
Language: English
Description
Summary: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.

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