Behavioral Finance

Examples of Behavioral Finance in the following topics:

• Employee Role in Preventing and Addressing Unethical Behavior

• Behavioral Economics: Irrational Actions

  • Behavioral economics focuses on the bounds of rationality of economic agents.
  • Behavioral economics has specific characteristics based on what is studied.
  • Behavioral finance: the intent is to explain why market participants make systematic errors.
  • Behavioral game theory: analyzes interactive strategic decisions and behavior using the methods of game theory, experimental economics, and experimental psychology.
  • Behavioral economics was born out of the combination of economics and psychology.

• Constraint on Managers

  • Managers who make decisions about the firm's corporate behavior will have their actions influenced by capital structure and the resources that it allows them to use.
  • Managerial finance is the branch of the industry that concerns itself with the managerial significance of finance techniques.

• Finance

• Chapter Questions

  • Treasury changes the taxes or changes its borrowing behavior.

• Equity Finance

  • Companies can use equity financing to raise money and/or increase shareholder liquidity (through an IPO).
  • Financing a company through the sale of stock in a company is known as equity financing.
  • Unofficial financing known as trade financing usually provides the major part of a company's working capital (day-to-day operational needs).
  • According to finance theory, as a firm's risk increases/decreases, its cost of capital increases/decreases.
  • This theory is linked to observation of human behavior and logic: capital providers expect reward for offering their funds to others.

• Joint Venture

• Licensing Agreements

• Exporters

• Inadequate or incorrect marketing, cooperation, finance, or HR strategies

  • Growth is also at risk if start-ups fail to develop strategic planning, marketing, financing, risk management, HR management, organization, or policies for internationalization.
  • Growth mistakes made in regard to marketing, financing, and HR management are particularly serious.
  • However, what is much more common is opportunistic behavior by the senior partner, where it is paid well by the junior partner for its marketing activities, but then it does not in fact aggressively market the junior partner's products.
  • A third group of flawed growth strategies concerns the financing of growth.
  • In the initial phases of the life cycle of start-ups, growth can scarcely be financed out of their profits, nor can it generally be financed alone by the founders' equity.