Behavioral Corporate Finance: An Updated Survey

107 Pages Posted: 29 Aug 2011 Last revised: 13 May 2023

See all articles by Malcolm P. Baker

Malcolm P. Baker

Harvard Business School; National Bureau of Economic Research (NBER)

Jeffrey Wurgler

NYU Stern School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 4 versions of this paper

Date Written: August 2011

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.

Suggested Citation

Baker, Malcolm P. and Wurgler, Jeffrey A., Behavioral Corporate Finance: An Updated Survey (August 2011). NBER Working Paper No. w17333, Available at SSRN: https://ssrn.com/abstract=1918663

Malcolm P. Baker (Contact Author)

Harvard Business School ( email )

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HOME PAGE: http://www.people.hbs.edu/mbaker

National Bureau of Economic Research (NBER)

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Jeffrey A. Wurgler

NYU Stern School of Business ( email )

Stern School of Business
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New York, NY 10012-1126
United States
212-998-0367 (Phone)
212-995-4233 (Fax)

HOME PAGE: http://www.stern.nyu.edu/~jwurgler/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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