We examine the effect of trust on financial investment and contracting decisions in a micro-economic environment where trust is exogenous. Using hand-collected data on European venture capital, we show that the Eurobarometer measure of trust among nations significantly affects investment...

Behavioral Corporate Finance provides new and testable explanations for long-standing corporate-finance puzzles by applying insights from psychology to the behavior of investors, managers, and third parties (e. g., analysts or bankers). This chapter gives an overview of the three leading streams...

We use detailed assessments of CEO personalities to explore the option-based measure of CEO overconfidence, Longholder, introduced by Malmendier and Tate (2005a) and widely used in the behavioral corporate finance and economics literatures. Longholder is significantly related to several specific...

We characterize investors’ moral preferences in a parsimonious experimental setting, where we auction stocks with various ethical features. We find strong evidence that investors seek to align their investments with their social values (“value alignment”), and find no evidence of behavior...

We investigate whether individuals' experiences of macro-economic outcomes have long-term effects on their risk attitudes, as often suggested for the generation that experienced the Great Depression. Using data from the Survey of Consumer Finances from 1964-2004, we find that individuals who...

Policymaking for posterity involves current decisions with distant consequences. Contrary to conventional prescriptions, we conclude that the greater wealth of future generations may strengthen the case for preserving environmental amenities; lower discount rates should be applied to the far...

We estimate discount rates of 555 subjects using a laboratory task and find that these individual discount rates predict inter-individual variation in field behaviors (e.g., exercise, BMI, smoking). The correlation between the discount rate and each field behavior is small: none exceeds 0.28 and...

This paper starts by discussing consumers' cognitive and emotional reaction to posted prices. Cognitively, some consumers do not appear to make effective use of price information to maximize their consumption-based utility. Emotionally, prices can induce regret and anger among consumers. The...

This paper discusses how the effects of taxes on economic behavior are important for revenue estimation, for calculating efficiency effects, and for understanding short-term macroeconomoic consequences. The primary focus is on taxes on labor income but some attention is given to taxes on income...