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Open AccessArticle
Exploring the Usefulness of Real Options Theory for Foreign Affiliate Divestments: Real Abandonment Options’ Applications
by
Andrejs Čirjevskis
Andrejs Čirjevskis
Faculty of Business and Economics, RISEBA University of Applied Sciences, Meza Street 3, LV-1048 Riga, Latvia
J. Risk Financial Manag. 2024, 17(10), 438; https://doi.org/10.3390/jrfm17100438 (registering DOI)
Submission received: 1 August 2024
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Revised: 7 September 2024
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Accepted: 9 September 2024
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Published: 29 September 2024
Abstract
Scholars propose that future research on real options theory should shift attention away from option buying during the first investment stage and toward option execution after investment. Researchers maintain that it would be interesting to explore the circumstances under which investors decide to withdraw their investments, thereby exercising the option to abandon their investments. The present research seeks to fill the gap in the literature and investigate the applicability of real options theory when an organization enhances sustainability policies while focusing on disciplined capital allocation through exit strategies. With case study data on Natura &Co’s divestment strategy for the Body Shop in November 2023, a real options analysis revealed the method’s practical advantages and disadvantages. This paper investigates real options theory in the context of the divestments of foreign affiliates, providing unique viewpoints and enhancing the theory beyond previous knowledge while also increasing our understanding of the divestiture phenomenon. This study concludes with a review of this paper’s theoretical contributions to real options theory, the managerial and practical/social implications of real options applications in general, and the valuation methods of abandonment options in particular, shedding light on the potential of future research.
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MDPI and ACS Style
Čirjevskis, A.
Exploring the Usefulness of Real Options Theory for Foreign Affiliate Divestments: Real Abandonment Options’ Applications. J. Risk Financial Manag. 2024, 17, 438.
https://doi.org/10.3390/jrfm17100438
AMA Style
Čirjevskis A.
Exploring the Usefulness of Real Options Theory for Foreign Affiliate Divestments: Real Abandonment Options’ Applications. Journal of Risk and Financial Management. 2024; 17(10):438.
https://doi.org/10.3390/jrfm17100438
Chicago/Turabian Style
Čirjevskis, Andrejs.
2024. "Exploring the Usefulness of Real Options Theory for Foreign Affiliate Divestments: Real Abandonment Options’ Applications" Journal of Risk and Financial Management 17, no. 10: 438.
https://doi.org/10.3390/jrfm17100438
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