Decision Making Using Behavioral Finance for Capital Budgeting Valuation,

di Yuri Biondi e Giuseppe Marzo

pubblicato in Baker and English (Eds), Capital Budgeting Valuation: Financial Analysis for Today’s Investment Projects, John Wiley & Sons, Inc., 2011, pp. 421-444.

The role of biases in investment project valuation

The accepted approach to capital budgeting leaves decision makers without appropriate guidance because it ignores the cognitive, organizational, and institutional dimensions of their decision.

Drawing upon the institutional economic perspective, this chapter aims at disentangling the contribution of the behavioral and institutional approaches to financial decision making. Both individual decision making and the institutional rules framing the capital budgeting processes take place in specific organizational contexts. Behavioral approaches address individual processes of knowledge discovery, treatment, and revision. Institutional approaches deal with cultural, social, and regulatory structures that frame and shape those individual processes. The rest of the chapter reviews the contribution of each approach along three complementary organizational dimensions and related patterns of research. First, the cognitive dimension introduces a more comprehensive and realistic understanding of the working of the human mind in the context of financial decision making. Second, the organizational dimension explores this decision making in the specific socioeconomic contexts where that decision-making process takes place. Third, the institutional dimension subsumes alternative criteria of decision making that can be taken as a reference according to these behavioral and organizational perspectives

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Data pubblicazione: 9/02/2021

Argomento: Investimenti, Decisioni, Finanza
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