Behavioral Finance In Corporate Finance

The architecture of modern finance theories are based on rational hypothesis and efficient market hypothesis. But with the development of empirical research, we have discovered that the practices of finance decision-makers are different from the corporate value behaviors simulated by modern finance theories, the hypotheses of which have been questioned and challenged. We can say that modem finance theories are not perfect, and they can only make use of optimization decision models to explain what the best decision is. Meanwhile they are not able to probe into investors' practical decision procedures. To interpret practical financial behaviors better, behavioral finance has arisen with the development of experimental economics, economic psychology and behavioral economics based on the two disciplines mentioned above. Behavioral finance discusses the psychological characteristics, such as cognition, emotion and attitude, in the process of investment decision making, and the inefficient market caused by them.The research of behavioral finance of our country started very late, and most of existing studies focus on summaries of behavioral finance theories and the explanation of unusual phenomena in security market with these theories, which are seldom applied in corporate finance. Based on the research of behavioral finance theories both at home and abroad, this article introduces the existing architecture of behavioral finance theories systematically, compares them with traditional finance theories, and investigates the application of behavioral finance theories in corporate finance, on the foundation of the comparisons of behavioral finance theories and traditional finance theories on financing policy ,investment policy,dividend policy. So it can bring about a financing strategy aimed at incomplete rational and inefficient market.This article mainly contains six parts. The first one is an introduction to the background and significance of the article, the generalization, the thought and methods, and the contents of the research. The second part is a systematical presentation of behavioral finance theories, including the basic contents of traditional finance theories and the problems facing them, the query of behavioral finance theories about efficient...