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Behavioral Corporate Finance: An Updated Survey

  • Malcolm Baker
  • Jeffrey Wurgler

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.

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File URL: http://www.nber.org/papers/w17333.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17333.

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Date of creation: Aug 2011
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Publication status: published as Baker, Malcolm, and Jeffrey Wurgler. "Behavioral Corporate Finance: A Current Survey." In Handbook of the Economics of Finance. Vol. 2, edited by George M. Constantinides, Milton Harris, and Rene M. Stulz. Handbooks in Economics. New York, NY: Elsevier, 2012.
Handle: RePEc:nbr:nberwo:17333
Note: CF
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