NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Behavioral Corporate Finance

Ulrike Malmendier

NBER Working Paper No. 25162
Issued in October 2018
NBER Program(s):Corporate Finance

Behavioral Corporate Finance provides new and testable explanations for long-standing corporate-finance puzzles by applying insights from psychology to the behavior of investors, managers, and third parties (e. g., analysts or bankers). This chapter gives an overview of the three leading streams of research and quantifies publication output and trends in the field. It emphasizes how Behavioral Corporate Finance has contributed to the broader field of Behavioral Economics. One contribution arises from the identification of biased behavior (also) in successful professionals, such as CEOs, entrepreneurs, or analysts. This evidence constitutes a significant departure from the prior focus on individual investors and consumers, where biases could be interpreted as `low ability,' and it implies much broader applicability and implications of behavioral biases. A related contribution is the emphasis on individual heterogeneity, i. e., the careful consideration of the type of biases that are plausible for which type of individual and situation.

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Document Object Identifier (DOI): 10.3386/w25162

 
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