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Research Collection Lee Kong Chian School Of Business

Operations and Supply Chain Management

Financing

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Full-Text Articles in Business

Stochastic Capacity Investment And Flexible Vs. Dedicated Technology Choice In Imperfect Capital Markets, Onur Boyabatli, L. Bertil Toktay Dec 2011

Stochastic Capacity Investment And Flexible Vs. Dedicated Technology Choice In Imperfect Capital Markets, Onur Boyabatli, L. Bertil Toktay

Research Collection Lee Kong Chian School Of Business

This paper analyzes the impact of endogenous credit terms under capital market imperfections in a capacity investment setting. We model a monopolist firm that decides on its technology choice (flexible versus dedicated) and capacity level under demand uncertainty. Differing from the majority of the stochastic capacity investment literature, we assume that the firm is budget constrained and can relax its budget constraint by borrowing from a creditor. The creditor offers technology-specific loan contracts to the firm, after which the firm makes its technology choice and subsequent decisions. Capital market imperfections impose financing frictions on the firm. Our analysis contributes to …


Technical Appendix To "Stochastic Capacity Investment And Flexible Vs. Dedicated Technology Choice In Imperfect Capital Markets", Onur Boyabatli May 2011

Technical Appendix To "Stochastic Capacity Investment And Flexible Vs. Dedicated Technology Choice In Imperfect Capital Markets", Onur Boyabatli

Research Collection Lee Kong Chian School Of Business

Technical appendix with proofs for the technical statements in the article: Stochastic capacity investment and flexible vs. dedicated technology choice in imperfect capital markets. (2011). Management Science, 57 (12), 2163 - 2179. https://doi.org/10.1287/mnsc.1110.1395


Interaction Of Technology Choice And Financial Risk Management Under Costly External Financing, Onur Boyabatli, L. Beril Toktay Jun 2005

Interaction Of Technology Choice And Financial Risk Management Under Costly External Financing, Onur Boyabatli, L. Beril Toktay

Research Collection Lee Kong Chian School Of Business

This paper analyzes the integrated operational and financial risk management portfolio of a firm that determines whether to use flexible or dedicated technology and whether to undertake financial risk management or not. The risk management value of flexible technology is due to its risk pooling benefit under demand uncertainty. The financial risk management motivation comes from the existence of deadweight costs of external financing due to capital market imperfections. Financial risk management has a fixed cost, while technology investment incurs both fixed and variable costs. The firm's limited budget, which depends partly on a tradable asset, can be increased by …