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Behavioral Corporate Finance: An Updated Survey

Malcolm Baker and Jeffrey Wurgler

Chapter Chapter 5 in Handbook of the Economics of Finance, 2013, vol. 2, pp 357-424 from Elsevier

Abstract: We survey the theory and evidence of behavioral corporate finance, which generally takes one of two approaches. The market timing and catering approach views managerial financing and investment decisions as rational managerial responses to securities mispricing. The managerial biases approach studies the direct effects of managers’ biases and nonstandard preferences on their decisions. We review relevant psychology, economic theory and predictions, empirical challenges, empirical evidence, new directions such as behavioral signaling, and open questions.

Keywords: Behavioral; Corporate Finance; Sentiment; Catering; Market Timing; Irrational; Bias; Overconfidence; Optimism; Signaling (search for similar items in EconPapers)
JEL-codes: G14 G30 G31 G32 G34 G35 (search for similar items in EconPapers)
Date: 2013
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Working Paper: Behavioral Corporate Finance: An Updated Survey (2011) Downloads
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DOI: 10.1016/B978-0-44-453594-8.00005-7

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