Behavioral finance FAQ / Glossary (Corporate Behavior)
This is a separate page of the B section of the Glossary.
This page is a spin off of the behavioral article
Dates of related message(s) in the
Behavioral-Finance group (*):
Year/month, d: developed / discussed,
in finance / economics / management
This article has its own page
Behavioral corporate management
See also overreliance
on management objectives
What makes CEOs tick?
And how do corporations really navigate
in uncharted waters?
Behavioral corporate management (*) is the study of behaviors, rational or
not (**), which are found:
In business and corporate organization and operations,
In executive decisions,
In corporate governance,
And so on, in relation with other cases that imply hierarchy
and administration (see below "related topics").
To sum it up, it tries to explore the little "work secrets" of the business
and its bosses (**), and to give them a few tips to avoid blunders.
(*) Also called corporate behavioral management / corporate behavioral
economics / corporate behavioral finance.
Yes, you can choose!
(**) The financial / economic "rationality" criterion is usually value
maximizing, albeit a narrow, and not easy to define, notion (see
(***) And by extension its staff, here we have psychology of work /
The need to understand
what is going on in a corporation
After Amazonian tribes, corporations are the last frontier for
Much has been written on leadership,
decision making, organization
Much has also been written on how isolated
Amazonian, Indonesian or ...Parisian
Many novelists, journalists, script writers and
ideologues earn their bread in corporation
But even so, how
behave is a still
The main aspects observed
in corporate behavior
Looking for brain fingerprints on the executive desk.
This inquisitive field of research covers, among less blatant aspects,
the following psychological and sociological traits and issues:
Generally, the various styles of business-making,
governance and management.
The main formal or informal rules and practices of the
For example privileging either conformity or innovation
The balance between narrow economic motivations and
more general drives: ethics, job satisfaction, affect, power,
The decision making process inside the firm and the
repartition of powers: empowerment, agency theory,
The styles of internal and external communication /
Not to forget cultural traits specific to a corporation:
attitudes toward quality and service, development, risk
It also tries to find what specific corporate behavioral biases can make
things go wrong and create havoc
The main corporate orientations involved
When companies get conservative, self-centered and
committed (see commitment) to traditions,
even when the related activities and practices become obsolete (see
status quo bias).
Or on the other hand when they over-diversify and
overextend their business in a wild binge.
This could show a lack of clear strategic vision as well as an
overconfidence in an organization that might be unable to
manage what becomes a "monster" in size and complexity.
In particular, the rationale behind some mergers and
is sometimes doubtful (see "winner's curse").
Their attitudes to financial leveraging might be over-cautious
Specific manager traits, which might be behind those
corporate biases, such as narcissism (see that word), or at least
Although this biased mental attitude might help to make bold and
successful decisions outside the trodden path, it might also bring
behavioral excesses that put the business in danger.
Some excessive remuneration practices of top
executives, notably in big corporations, at the detriment of
of shareholders and other stakeholders
An overreliance on management objectives and norms (see
the related article)
The overconfidence can also pollute the whole
corporate culture into conformity and arrogance,
It can be shared by the whole workforce and make the corporation
blind to new evolutions (conservatism) as well as to risks (by
discarding safety rules).
The same thing can happen to public administrations (see public
Corporations are among the top dogs in the ecosystem.
How they behave is crucial for society.
In our world corporations are key players and behavioral corporate finance /
management is one of the main "nodes" among other economic and social
Obviously behavioral management is related to behavioral economics
and behavioral finance in general.
It can be considered as a part of the broader subject of administrative
It has also some similarities with the study of public choice and of
public / corporate governance.
It has some relation with entrepreneur psychology (see that phrase) at
least in small businesses,
It tends to be quite different in well established large corporations that can
have a bias for conformity.
As for democracy in businesses, it certainly can progress, with ess
pyramidal organisations, but it is made difficult by the existence of multiple
stakeholders, and the legitimate primacy of the main sovereign: the
customer, who holds in its hand the final business survival decision.
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