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Rational Corporations in Irrational Markets

In: Behavioral Finance and Capital Markets

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  • Adam Szyszka

Abstract

In this chapter, it is assumed that corporate managers behave in a fully rational manner and attempt to take advantage of investors’ irrationality and temporary market anomalies. We investigate how investor biases and market inefficiency may impact financial and investment policy of corporations. In the area of financial decisions, we study equity offerings, stock repurchases, debt issues and asset exchange offers, and dividend policy. In regard to investment choices, we investigate real investment, mergers and acquisitions, decisions to enter a new market, and the choice between focus or diversity in business operations. We also look at earnings management, adjusting nominal share price, changing firm names, and other managerial practices targeted at market timing, catering to investor tastes, and exploiting market inefficiencies.

Suggested Citation

  • Adam Szyszka, 2013. "Rational Corporations in Irrational Markets," Palgrave Macmillan Books, in: Behavioral Finance and Capital Markets, chapter 0, pages 171-195, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-36629-0_8
    DOI: 10.1057/9781137366290_8
    as

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