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Rev Fin 2002; 15:35-64
© 2002 the Society for Financial Studies

When Are Real Options Exercised? An Empirical Study of Mine Closings

Alberto Moel
Monitor Corporate Finance, Monitor Group

Peter Tufano
Harvard Business School and NBER

Abstract

In this article, we study a well-known real option: the opening and closing of mines. Using a new database that tracks the annual opening and closing decisions of 285 developed North American gold mines in the period 1988–1997, we find that the real options model is a useful descriptor of mines' opening and shutting decisions. In addition, we find that the decision whether to shut a mine is related to firm-specific managerial factors not normally considered within a strict real options model.


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[Abstract] [Full Text] [PDF]


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