Opportunities and Limitations of Behavioural Finance for Efficient Corporate Governance

Abstract

: Behavioural corporate finance tends to add cognitive and psychological elements to the sophisticated mathematical and statistical models of modern corporate finance by observing and studying the behaviour of investors and managers. The theory does not offer a model for predicting the decision that will be made, but it provides the possibility to predict whether a ‘riskier’ or ‘safer’ decision will be made based on the ‘exclusion from the context’ through which it will determine its reference point and decision frame. The goal of this paper is to point out the limitations and reasons for the failure in modelling and concretization of scientific findings due to the limited access and the exclusion of the determination of the ultimate life purpose and expediency.