Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • 2007
  • Chapter
  • The Handbook of Corporate Finance, Volume 1: Empirical Corporate Finance

Behavioral Corporate Finance: A Survey

By: Malcolm Baker, Richard Ruback and Jeffrey Wurgler
  • Format:Print
ShareBar

Abstract

Research in behavioral corporate finance takes two distinct approaches. The first emphasizes that investors are less than fully rational. It views managerial financing and investment decisions as rational responses to securities market mispricing. The second approach emphasizes that managers are less than fully rational. It studies the effect of nonstandard preferences and judgmental biases on managerial decisions. This survey reviews the theory, empirical challenges, and current evidence pertaining to each approach. Overall, the behavioral approaches help to explain a number of important financing and investment patterns. The survey closes with a list of open questions.

Keywords

Decisions; Prejudice and Bias; Debt Securities; Financial Management; Price; Theory; Investment; Problems and Challenges; Behavioral Finance; Corporate Finance

Citation

Baker, Malcolm, Richard Ruback, and Jeffrey Wurgler. "Behavioral Corporate Finance: A Survey." In The Handbook of Corporate Finance, Volume 1: Empirical Corporate Finance, edited by Espen Eckbo. New York: Elsevier/North-Holland, 2007.
  • Find it at Harvard
  • Read Now

About The Authors

Malcolm P. Baker

Finance
→More Publications

Richard S. Ruback

Finance
→More Publications

More from the Authors

    • May 2025
    • Faculty Research

    gWorks

    By: Richard S. Ruback and Royce G. Yudkoff
    • May 2025 (Revised May 2025)
    • Faculty Research

    Heritage Holding

    By: Richard S. Ruback and Royce Yudkoff
    • March 2025
    • Faculty Research

    Thrive Earlier Detection (B) and the Evolution of Catalio Capital Management

    By: Malcolm Baker, Tara Bozzini and William Vrattos
More from the Authors
  • gWorks By: Richard S. Ruback and Royce G. Yudkoff
  • Heritage Holding By: Richard S. Ruback and Royce Yudkoff
  • Thrive Earlier Detection (B) and the Evolution of Catalio Capital Management By: Malcolm Baker, Tara Bozzini and William Vrattos
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College.