The Use of Real Options Theory in Scandinavia's Largest Companies

24 Pages Posted: 17 Nov 2015

See all articles by Anders Horn

Anders Horn

Norwegian University of Science and Technology

Frode Kjærland

Sør-Trøndelag University College

Peter Molnár

University of Stavanger

Beate Steen

Norwegian University of Science and Technology

Date Written: January 16, 2015

Abstract

We survey the CFOs of 1500 largest companies from Norway, Denmark and Sweden (500 from each country) about their capital budgeting process with focus on the real options analysis. Only 6% of the respondents use real options, whereas the most used technique, the net present value, is used by 74% of the CFOs. Real options are more often used by companies in the energy and biotech sectors, large companies and companies with high capital and R&D expenditures. Lack of familiarity is the most important reason for non-use, where 70% of respondents report to not be familiar with real options concepts and techniques. For the respondents familiar with the framework, the complexity of real options is the main hinder for implementation.

Keywords: real options, capital budgeting, survey

JEL Classification: G31

Suggested Citation

Horn, Anders and Kjærland, Frode and Molnár, Peter and Steen, Beate, The Use of Real Options Theory in Scandinavia's Largest Companies (January 16, 2015). Available at SSRN: https://ssrn.com/abstract=2691371 or http://dx.doi.org/10.2139/ssrn.2691371

Anders Horn

Norwegian University of Science and Technology ( email )

Høgskoleringen
Trondheim NO-7491, 7491
Norway

Frode Kjærland

Sør-Trøndelag University College ( email )

E. C. Dahls gate 2
Postboks 2320
Trondheim, 7004
Norway

Peter Molnár (Contact Author)

University of Stavanger ( email )

UiS Business School
Stavanger, 4036
Norway

Beate Steen

Norwegian University of Science and Technology ( email )

Høgskoleringen
Trondheim NO-7491, 7491
Norway

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