Corporate Finance Decisions From the Perspective of Behavioral Finance Theory

Abstract

As both corporate executives managing the companies and investors investing in these companies are not completely rational, it is possible that both parties can make serial mistakes based on their behavioral biases. “Behavioral Corporate Finance” approach which is a comparatively new area in behavioral finance involves explaining managerial decisions as well as investors by taking into account pshycological factors related to human behaviors. This study aims to summarize research on behavioral corporate finance and give some recommendations so that both managers and investors can make mutually successful decisions.