We survey the theory and evidence of behavioral corporate finance, which generally takes one of two approaches. The market timing and catering approach views managerial financing and investment decisions as rational managerial responses to securities mispricing. The managerial biases approach...

Dividend reductions have long been considered a "last resort" action for firm managers. Managerial reluctance to reduce dividends emanates from the view that dividend drops signal managerial pessimism regarding future earnings. Contrary to expectations, studies show that earnings rebound...

A deep-ingrained doctrine in asset pricing says that if an empirical characteristic-return relation is consistent with investor “rationality,” the relation must be “explained” by a risk (factor) model. The investment approach questions the doctrine. Factors formed on characteristics are...

The paper provides review of Modigliani-Miller capital structure irrelevance proposition and its development since 1958. The paper suggests some pedagogical insights and introduce risk-shifting interpretations of the MM model. We also discuss shapes of cost of debt and cost of equity functions...

This paper analyzes interdependence of three financial policies, investment decision, financing decision, and dividend policy. Interdependent relationship between the three has been extensively debated within literature of finance. While many studies have been conducted to normal economic...

This study investigates empirically effect of investment decision and dividend policy on financing decision. This research uses two proxies that represent investment decision those are actual investment and investment opportunity. The effects of size effect and profitability are controlled in...

This report expands into early 2013 studies of the raw performance (profitability) of $457.6 billion of buybacks executed since 2000 by a sample of 232 corporations. The sample companies, drawn mainly from the technology sector, enjoy total equity market value today of $1.221 trillion. 75.0% of...

We posit that firms with valuable real options have higher demand for cash and liquid assets and propose a simple procedure for identifying firms with valuable real options. Our procedure assumes that, all else being equal, a firm's real options are more valuable when their underlying volatility...

We document important interactions between tax incentives and corporate policies using a “quasi natural experiment” provided by a surprise announcement that imposed corporate taxes on a group of Canadian publicly-traded firms. The announcement caused a dramatic decrease in value although...