title: Company’s investment decision under uncertainty: Risk management approach
metadata.name: dc.contributor.author
metadata.value: Okulov, Vitaly L.
metadata.lang: -
metadata.name: dc.date.accessioned
metadata.value: 2017-07-18T12:32:18Z
metadata.lang: -
metadata.name: dc.date.available
metadata.value: 2017-07-18T12:32:18Z
metadata.lang: -
metadata.name: dc.date.issued
metadata.value: 2017-06
metadata.lang: -
metadata.name: dc.identifier.citation
metadata.value: Okulov V. L. Company’s investment decision under uncertainty: Risk management approach. Vestnik of Saint Petersburg University. Management, 2017, vol. 16, issue 2, pp. 191–214.
metadata.lang: en_GB
metadata.name: dc.identifier.other
metadata.value: 10.21638/11701/spbu08.2017.201
metadata.lang: -
metadata.name: dc.identifier.uri
metadata.value: http://hdl.handle.net/11701/6902
metadata.lang: -
metadata.name: dc.description.abstract
metadata.value: The practice of investment projects analysis in companies often does not comply with the theory’s recommendations; everywhere the companies add markups (risk premiums) to the fair return required by shareholders when calculating NPV of project. The size of the risk premium is chosen almost arbitrarily. The main goal of this paper is to propose the model that will help to explain the entering of specific risk premium to discount rate in NPV-rule and to calculate the size of this premium. We suppose that risk-averse managers make investment decision taking into account both the market risk and specific risk of the project. Based on the theory of decision-making under uncertainty, we introduce two new criteria for investment decisions and propose two behavioral models. Both models are dealing with a single isolated project and company that is entirely funded by equity capital. It is necessary to analyze which additional factors (debt, other projects, risk tolerance, competitive environment, availability of real options of the project) can affect the risk premium. The proposed models can be a methodological basis for investment decision making, but to use them in practice, it is necessary to evaluate correctly the level of a specific risk of the project. Although these behavioral models describe the decisions of managers but they can be applied to the analysis of investment decisions of capital owners.
metadata.lang: en_GB
metadata.name: dc.description.sponsorship
metadata.value: This study was supported by St Petersburg State University, research project No 16.23.1841.2015 “Strategic Finance: Theoretical Approaches and International Practice”.
metadata.lang: en_GB
metadata.name: dc.language.iso
metadata.value: ru
metadata.lang: en_GB
metadata.name: dc.publisher
metadata.value: St Petersburg State University
metadata.lang: en_GB
metadata.name: dc.relation.ispartofseries
metadata.value: Vestnik of St Petersburg University. Management;Volume 16; Issue 2
metadata.lang: -
metadata.name: dc.subject
metadata.value: investment decisions
metadata.lang: en_GB
metadata.name: dc.subject
metadata.value: NPV
metadata.lang: en_GB
metadata.name: dc.subject
metadata.value: agency problem
metadata.lang: en_GB
metadata.name: dc.subject
metadata.value: alternative market portfolio
metadata.lang: en_GB
metadata.name: dc.subject
metadata.value: specific project risks
metadata.lang: en_GB
metadata.name: dc.subject
metadata.value: specific risk premium
metadata.lang: en_GB
metadata.name: dc.subject
metadata.value: value-at-risk
metadata.lang: en_GB
metadata.name: dc.subject
metadata.value: probability of losses
metadata.lang: en_GB
metadata.name: dc.title
metadata.value: Company’s investment decision under uncertainty: Risk management approach
metadata.lang: en_GB
metadata.name: dc.type
metadata.value: Article
metadata.lang: en_GB
resources.filename: 01-Okulov.pdf
resources.url: https://dspace.spbu.ru/bitstream/11701/6902/1/01-Okulov.pdf
resources.format: Adobe PDF
resources.size: 397,07 kB