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Behavioral Capital Structure: Is the Neoclassical Paradigm Threatened? Evidence from the Field

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We show that capital structure decisions and financial behavior in general seems to deviate from the traditional neoclassical paradigm. Behavioral finance and the post Keynesian financial behavior approach provide better explanations in “decoding” financial managers' opinions and behavior. Specifically, our starting point is the analysis of qualitative corporate data from the Greek market. The data come from the answers in a detailed questionnaire, and in this paper we analyze capital structure determination and the relationship between capital structure and stock price. Results are in favor of the market timing approach and the managers' opinions and behavior on issues concerning capital structure determinants, and the relationship between capital structure and stock price seem to be better explained under the behavioral finance proponents and within the post Keynesian paradigm.

Keywords: Behavioral finance; Capital structure; Post-Keynesian approach; Qualitative corporate analysis

Document Type: Research Article


Affiliations: 1: Hellenic Open University, 2: Athens University of Economics and Business,

Publication date: January 1, 2009


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