Behavioral Corporate Finance: An Updated Survey

Abstract:     
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.

Number of Pages in PDF File: 106

Keywords: Behavioral, Corporate Finance, Sentiment, Catering, Market Timing, Irrational, Bias, Overconfidence, Optimism, Signaling, Behavioral Signaling

JEL Classification: G14, G30, G31, G32, G34, G35

working papers series