A Behavioral Perspective on Corporate Law and Corporate Governance

This chapter examines corporate law and governance from a behavioral perspective. It begins with an overview of the growing body of behavioral knowledge and its impact on the core assumptions of the agency theory. It then goes on to consider a number of specific areas of corporate law and governance where behavioral perspectives are particularly relevant, with particular emphasis on rule making. The chapter also explores how the board of directors performs, along with modern executive compensation systems, often in the form of performance-based pay. Finally, the chapter turns to the interaction between executives, non-executives, and (institutional) investors in corporate governance.