Presidential Address: Corporate Finance and Reality

103 Pages Posted: 14 Mar 2022 Last revised: 16 Jul 2022

See all articles by John R. Graham

John R. Graham

Duke University; National Bureau of Economic Research (NBER)

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Date Written: March 2022


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

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Suggested Citation

Graham, John Robert, Presidential Address: Corporate Finance and Reality (March 2022). NBER Working Paper No. w29841, Available at SSRN:

John Robert Graham (Contact Author)

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