The Influence of Production Technology on Risk and the Cost of Capital

Laurence David Booth

43 citations0/0 files storedJournal of Financial and Quantitative Analysis

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Capital Investment and Risk Analysis Corporate Finance and Governance Financial Analysis and Corporate Governance

Abstract

This paper uses a time-state-preference valuation model to examine how the firm's choice of technology and production method affects its equilibrium level of risk and, as a result, the firm's cost of capital. A fixed and flexible method of production is analyzed for a firm using a Cobb-Douglas production function. In both cases, it is found that risk and the cost of capital decrease with the level of capital intensity. Implications are drawn for the specification of empirical tests of the determinants of risk.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 43 citations exist upstream.

References

1980Agency Problems and the Theory of the Firm 1976The Valuation of Uncertain Income Streams and the Pricing of Options 1984The Impact of the Degrees of Operating and Financial Leverage on Systematic Risk of Common Stock 1973A MEAN‐VARIANCE SYNTHESIS OF CORPORATE FINANCIAL THEORY 1974On the Association Between Operating Leverage and Risk 1971Investment, Interest and Capital.1982On the Relationship between Systematic Risk and the Degrees of Operating and Financial Leverage 1980Systematic Risk and the Theory of the Firm

Cited by

2010A note on operating leverage and expected rates of return 2023Demand uncertainty, inventory, and cost structure 2006Network economics and optimal replacement of age-structured IT capital

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.