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EFFICIENCY OF FINANCIAL INSTITUTIONS
GHEORGHE POPESCU
ABSTRACT. Kester attributes the portion of a firm’s capitalization not
explained by assets-in-place to the present value of its growth options.
John and Lang adopt a sequential structure to analyze the stock price
response to dividend announcements depending on prior insider
trading. Andrés-Alonso et al. test whether stock prices reflect in-
vestor’s expectations regarding the value of real options.
Al-Horani et al. find that the returns of a sample of UK
firms during the period 1990–1996 are associated with the
ratios of research and development expenditures to market
value and book-to-market as predicted under real options
reasoning.1 Larger firms are not only typically better prepared to
obtain necessary funding to acquire and exercise their options,
but simultaneously committed as well in different markets and
businesses activities.2 Size can be understood as a sign of a
firm’s capability to manage efficiently its options. The existence
of state-contingent securities ensures that, in equilibrium,
households are homogeneous with respect to consumption and
asset holdings.3 Berger and Mester find that both the translog
and the Fourier flexible functional form, which is a global
approximation that includes a standard translog plus Fourier
trigonometric terms, yielded essentially the same average level
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and dispersion of measured efficiency, and both ranked the
individual banks in almost the same order.4 Kester attributes
the portion of a firm’s capitalization not explained by assets-in-
place to the present value of its growth options.5 The coefficients
of stock return skewness and beta reflect the impact of growth
options on shifting their distribution to the right and increasing
their systematic risk.6
Adam and Goyal estimate the value of growth options of
a sample of mining companies, and observe that the market
value of a company’s investment opportunities is empirically
related to the book-to-m