Behavioral Corporate Finance: An Updated Survey
NBER Working Paper No. 17333
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.
You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.