CCFin research

Behavioural finance is a growing field of study in both corporate finance and asset pricing. Our researchers investigate seemingly irrational decisions made by corporate managers and investors, applying findings from psychology literature on cognitive bias in decision making.

Within the corporate capital structure, we look at investment and payout within a managerial agency framework.

Mitigating the conflicts that arise from the opposing interests of a firm’s principals and agents in order to maximise the firm’s value is the central aim of corporate governance. However, while most economists and legal scholars agree on this general aim, there remains an ongoing debate on what mechanisms should be classified as “good” (ie value-increasing) versus “bad” (ie value-decreasing) corporate governance. We explore this topic here.

We make use of corporate governance reforms implemented in many countries around the world since the early 2000’s and investigate their effects on CEO compensation.

Research work that helps us understand the role of financial markets on economic growth will have a great deal of policy implications. They will also influence policy makers when they deal with financial sector policies, especially when it comes to prioritisation. We look at the question of whether, and if so how, stock market development promotes economic growth.

Understanding anomalies documented in finance literature is one of the most important challenges for researchers in the field of asset pricing. Recently, a new path – the investment CAPM – has emerged to explain these anomalies. Our researchers dive deep into this topic to explain how and why these anomalies occur.

In asset pricing, a macroeconomic risk is an event that can influence most financial assets. Many studies have explored the role of these macro-variables in explaining a firm or a country’s financial decisions and on the pricing of stocks, corporate and sovereign bonds. We derive and study in models that combine both sources of risk, how long-run risk can improve our understanding of various phenomena in finance.

Mergers and acquisitions (M&A) are important forms of investment made by firms and also transactions in the market of corporate control. Researchers have discussed various potential drivers, like market overvaluation and managerial timing. We show that economies of scale can lead to merger waves during economic booms. We also model how the returns from merging are shared between the acquirer and the acquiree.

This research considers the valuation of investments under uncertainty. We value options embedded in investments (‘real options’) such as entry, growth, disinvestment and abandonment options. Our research expands on this topic area, as well as incorporating strategic behaviour between firms into the valuation framework.

The role of information has always been an active research area of corporate finance. In particular, asymmetric information between managers and outside investors has received a great deal of attention. We delve deep into this topic, finessing theories building on the body of thought that currently exists.