Behavioural Corporate Finance: Existing Research and Future Directions

Abstract

Behavioural corporate finance (BCF) examines the effects of managerial and investor psychological biases on a firm's corporate finance decisions (such as investment appraisal and capital structure). In contrast to the well-developed research in behavioural finance (which examines the effects of investors' biases on the behaviour of the financial markets), the emerging research in BCF is relatively young. In this paper, we review the existing research to date in BCF and suggest areas for future development.