IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Corporate Governance And Behavioral Finance: From Managerial Biases To Irrational Investors

Listed author(s):
  • HERCIU Mihaela

    (Lucian Blaga University of Sibiu, Romania)

  • OGREAN Claudia

    (Lucian Blaga University of Sibiu, Romania)

Corporate governance is concerned about the ways in which investors assure themselves of getting a return on their investment, on one hand, and is focus on motivating managers to increase the company profit, on the other hand (the agency theory). Corporate governance emerges from the interaction between managers and investors. Managers are often more likely to invest the extra cash-flow or profit than to return it to shareholders. But, both managers and investors are lees then fully rational. Sometimes their behavior is based on cognitive psychology. In this context, we are dealing with two problems: managerial biases and irrational investors. Managerial biases focus on the illusion of optimism and overconfidence. Instead, irrational investors can produce overreaction to something and under-reaction to other thing. By this paper we try to emphasize that both managerial biases and irrational investors will affect corporate governance and furthermore will drive to company distress (even bankruptcy) if decisions are more based on cognitive psychology than on rational information.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://eccsf.ulbsibiu.ro/RePEc/blg/journl/916herciu&ogrean.pdf
Download Restriction: no

Article provided by Lucian Blaga University of Sibiu, Faculty of Economic Sciences in its journal Studies in Business and Economics.

Volume (Year): 9 (2014)
Issue (Month): 1 (April)
Pages: 66-72

as
in new window

Handle: RePEc:blg:journl:v:9:y:2014:i:1:p:66-72
Contact details of provider: Postal:
Lucian Blaga University of Sibiu, Faculty of Economic Sciences Dumbravii Avenue, No 17, postal code 550324, Sibiu, Romania

Phone: 004 0269 210375
Fax: 004 0269 210375
Web page: http://economice.ulbsibiu.ro/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Geoffrey C. Kiel & Gavin J. Nicholson, 2003. "Board Composition and Corporate Performance: how the Australian experience informs contrasting theories of corporate governance," Corporate Governance: An International Review, Wiley Blackwell, vol. 11(3), pages 189-205, July.
  2. Fama, Eugene F., 1998. "Market efficiency, long-term returns, and behavioral finance," Journal of Financial Economics, Elsevier, vol. 49(3), pages 283-306, September.
  3. Kent D. Daniel, 2001. "Overconfidence, Arbitrage, and Equilibrium Asset Pricing," Journal of Finance, American Finance Association, vol. 56(3), pages 921-965, 06.
  4. Ritter, Jay R., 2003. "Behavioral finance," Pacific-Basin Finance Journal, Elsevier, vol. 11(4), pages 429-437, September.
  5. repec:hrv:faseco:30747159 is not listed on IDEAS
  6. Ulrike Malmendier & Geoffrey Tate, 2005. "Does Overconfidence Affect Corporate Investment? CEO Overconfidence Measures Revisited," European Financial Management, European Financial Management Association, vol. 11(5), pages 649-659.
  7. J B Heaton, 2002. "Managerial Optimism and Corporate Finance," Financial Management, Financial Management Association, vol. 31(2), Summer.
  8. Randall Morck, 2008. "Behavioral finance in corporate governance: economics and ethics of the devil’s advocate," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 12(2), pages 179-200, May.
  9. Barberis, Nicholas & Shleifer, Andrei & Vishny, Robert, 1998. "A model of investor sentiment," Journal of Financial Economics, Elsevier, vol. 49(3), pages 307-343, September.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:blg:journl:v:9:y:2014:i:1:p:66-72. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mihaela Herciu)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.