Presidential Address: Corporate Finance and Reality

102 Pages Posted: 10 Jan 2022 Last revised: 9 Mar 2022

See all articles by John R. Graham

John R. Graham

Duke University; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: December 27, 2021


This paper conducts surveys that document CFO perspectives on corporate planning, corporate investment, capital structure, payout, and the goal of the firm. Current policy choices are compared to CFO survey data from two decades prior, which allows me to identify decision-making themes that are common across policies and through time. These common elements of real-world corporate finance indicate that companies make decisions based on internal forecasts that are miscalibrated and thought to be reliable only two years ahead; use decision rules that are conservative, sticky, simple, and that attempt to market time; and, emphasize corporate objectives that increasingly focus on stakeholders and revenues. These themes can guide and discipline academic models and tests, with the aim of better explaining outcomes. A model of satisficing decision-making aligns with many of these practice-of-finance characteristics: optimization is difficult in a complex fast-changing world, so managers use simple rules to make incremental improvements and they stick with rules that have worked well enough in the past. Non-behavioral models with costly biases can also account for some of the themes. Implications and avenues for future research are discussed.

A separate document of supplemental materials can be found here:
These supplemental materials contain the following items:
• PowerPoint slides that can be used for teaching and other purposes, and an Excel file containing the summary data underlying these slides
• a video presentation of the Presidential Address, which starts at 5:44 of the following link:
• a transcript and the presentation slides for the Presidential Address

Keywords: Corporate Finance, Investment, Capital Budgeting, Capital Structure, Payout, Planning, Forecast, Overconfidence, Miscalibration, Satisficing, Behavioral, Market Timing

JEL Classification: G02, G30, G31, G32, G35, A00

Suggested Citation

Graham, John Robert, Presidential Address: Corporate Finance and Reality (December 27, 2021). Available at SSRN: or

John Robert Graham (Contact Author)

Duke University ( email )

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