Behavioral Corporate Finance : A Brief Review

Traditional corporate finance focuses more on what business leaders are supposed to do than what they do now. Behavioral approach is designed to examine what they actually do, why they do it, and make suggestions on how they could do their jobs better. The main goal of this brief review is to understand psychological phenomena related to business behavior problems and how they affect financial decisions. Indeed, these phenomena involve general human characteristics, they affect managers and investors. So, managers need to understand how these phenomena affect their own judgments and decisions; however, they also need to understand the decisions of other managers, as well as the decisions of the investing public whose trading activities determine market prices.