Behavioral Corporate Finance

Traditional corporate finance assumes that managers and investors are rational and that capital markets are efficient. This is, however, often not the case. The behavioral approach to corporate finance relies on evidence from psychology and sociology of cognitive biases, heuristics, emotions, moods, framing effects, affect, social interaction (trust and fairness) etc. Behavioral Corporate Finance complements the traditional corporate finance models and provides the bridge – fills the gap - between the standard corporate finance textbook and empirical observations from the real business world.