A Modification on the Information Based Real Option Model and the R&D Valuation

• Main Authors: Yu-Wen Lan, 藍宇文
• Other Authors: Keng-Hsin, Lo
• Format: Others
• Language: en_US
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/46391898065433499410

博士 === 國立中央大學 === 企業管理研究所 === 96 === Bellalah(1999) followed the context of Merton(1987), who founded a market equilibrium model with incomplete information, firstly incorporate the information cost into an real option model (ROM) for R&D valuation. However, the Bellalah’s model though exhibited the R&D’s market value based upon information cost; it failed to catch the change of R&D’s payoff due to undefined events within project’s lifetime. More than this, it is plausible of that the R&D may depreciate while time elapses; its value could also vanish over night because of some exceptions for example the ‘protocol’ change. The aforesaid issues were not addressed by Bellalah therefore this study tried to propose a modified model for supplementation. As shown by the numerical analysis, the influence of information cost onto R&D value is roughly half of exponential decay (depreciation) and one third of Poisson event (a sudden event), which tells the new added factors outweighs the information cost as well as support our modification. We also found that the information cost affiliated with price is helpful for pursuing a more adequate price policy therefore it will boost the R&D value. As shown by the statistical analysis, the R&D value estimated by the modified ROM is an important explanatory variable to the systematic risk coefficient which means, whether managers or investors could be more prudent since they know better the risk level that an R&D investment (or a portfolio containing R&D) may have borne. For some extended topics, this study sustains the viewpoint of capitalization of R&D and, secondly, an estimation framework for the information cost was developed; which may redeem the deficiency before.