Real Option Exercise: Empirical Evidence

Paul H. Décaire, Erik P. Gilje, Jérôme P. Taillard

Research output: Contribution to journalArticlepeer-review

10 Scopus citations


We study when and why firms exercise real options. Using detailed project-level investment data, we find that the likelihood that a firm exercises a real option is strongly related to peer exercise behavior. Peer exercise decisions are as important in explaining exercise behavior as variables commonly associated with standard real option theories, such as volatility. We identify peer effects using localized exogenous variation in peer project exercise decisions and find evidence consistent with information externalities being important for exercise behavior. (JEL G30, G31, G32)

Original languageEnglish (US)
Pages (from-to)3250-3306
Number of pages57
JournalReview of Financial Studies
Issue number7
StatePublished - Jul 1 2020
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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