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Behavioral Corporate Finance: A Survey

Malcolm Baker, Richard S. Ruback and Jeffrey Wurgler ()

No 10863, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Research in behavioral corporate finance takes two distinct approaches. The first emphasizes that investors are less than fully rational. It views managerial financing and investment decisions as rational responses to securities market mispricing. The second approach emphasizes that managers are less than fully rational. It studies the effect of nonstandard preferences and judgmental biases on managerial decisions. This survey reviews the theory, empirical challenges, and current evidence pertaining to each approach. Overall, the behavioral approaches help to explain a number of important financing and investment patterns. The survey closes with a list of open questions.

JEL-codes: G30 G31 G32 G33 (search for similar items in EconPapers)
Date: 2004-11
New Economics Papers: this item is included in nep-cfn, nep-evo, nep-fin, nep-his, nep-hpe and nep-pke
Note: CF
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Published as Eckbo, Espen (ed.) Handbook in Corporate Finance: Empirical Corporate Finance. North Holland: Elsevier, 2007.

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