Behavioral Corporate finance: A New Paradigm shift to understand corporate decisions

Corporate finance aims to explain the financial. As a practical matter, this means that managers can take for granted that capital markets are efficient, with prices rationally reflecting public information about fundamental values. Likewise, investors can take for granted that managers will act in their self-interest, rationally responding to incentives shaped by compensation contracts, the market for corporate control, and other governance mechanisms. Behavioral corporate finance challenges conventional ideas about corporate finance and compensation strategies. Behavioral corporate finance is concerned with the manner in which behavioral beliefs, behavioral preferences, and inefficient prices impact the corporate financial decisions made by managers. The paper shows that the way in which behavioral finance differs from traditional finance. This paper explains the behavioral biases of manager and its effect in issuing equity and so the valuation of firm. Managers under their irrationality are taking decision about the security issuance which affects the firm and its value. The paper shows such kind of parameter which affects their decisions. ABSTRACT