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Behavioral corporate finance: a survey (2004)
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BibTeX
@MISC{Baker04behavioralcorporate,
author = {Malcolm Baker and Richard S. Ruback and Jeffrey Wurgler},
title = {Behavioral corporate finance: a survey},
year = {2004}
}
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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.
Keyphrases
behavioral corporate finance security market important financing empirical challenge distinct approach second approach current evidence pertaining rational response behavioral approach open question judgmental bias investment pattern investment decision managerial decision nonstandard preference managerial financing
