TY  - RPRT
U1  - Arbeitspapier
A1  - Schreiter, Maximilian
T1  - Project financing vs. corporate integration
BT  - decision-making under operational and financial risks
N2  - The article addresses the choice between setting up a project entity and integrating the project into a corporation from the perspective of a dynamic corporate finance model in the absence of operational syn-
ergies. The analysis builds upon a classic continuous-time framework with tax benefits of debt, costs of default and, more innovatively, a benefit or cost of abandonment derived for two projects with stochastic, correlated revenues. By implementing the model with a simulation-based approach, I show that foremost high correlations, high volatilities and high portions of fixed costs as well as heterogenous volatilities, bankruptcy costs and operational cost structures stimulate independent project structures. Further, a more difficult or costly access to external funds raises the benefits of merging activities in a combined firm.
KW  - Project financing
KW  - Financial synergies
KW  - Default risk
KW  - Abandonment options
KW  - Optimal capital structure
KW  - Real options
Y1  - 2020
UR  - https://www.realoptions.org/openconf2020/data/papers/422.pdf
N1  - Working Paper
ER  -