Valuing Announcement Options

This paper introduces a theory of corporate announcements based on the new concept of an announcement option which has not been previously recognized in the literature as an independently valuable real option de-coupled from strategy implementation. While contributing to the strategy and real options literature, the paper also bridges the corporate disclosure literature and theories of signalling. By conceptualising corporate announcements as real options, the paper provides a framework and focuses on a methodology for precisely valuing announcements. To illustrate the use and valuation of announcement options, the historical case of Prudential plc’s announcements concerning its internet venture Egg is analysed.