Research Handbook on the Economics of Corporate Law
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Research Handbook on the Economics of Corporate Law

Edited by Claire A. Hill and Brett H. McDonnell

Comprising essays specially commissioned for the volume, leading scholars who have shaped the field of corporate law and governance explore and critique developments in this vibrant and expanding area and offer possible directions for future research.
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Chapter 23: Behavioral Approaches to Corporate Law

Donald C. Langevoort


Donald C. Langevoort 1. INTRODUCTION In corporate legal scholarship, ‘behavioral’ analysis refers to using insights from psychology to address the relationships, rights and responsibilities among officers, directors, investors and other stakeholders. That does not make it a particularly well-defined subject. Psychology is a capacious field, running from the brain studies done by cognitive neuroscientists to the observations of interpersonal interactions in social cognition and social psychology laboratory experiments, the latter then bleeding into the separate field-study oriented research programs of sociology and cultural anthropology. In all these, there is so much – perhaps too much – for legal scholars to think about as potentially useful behavioral traits. Fortunately, researchers in business schools have for some time been using psychology as a tool for research specifically directed to organizational behavior and corporate governance, thereby giving legal scholars help in making connections of particular use to the analysis of corporate law-related issues (Camerer & Malmendier 2007). My contribution reflects on the challenges of making these connections and some of the successes that have occurred so far. I make no effort to provide a thorough literature review – the number of published articles and works in progress that plausibly fall into the ‘behavioral corporate law’ category is sizable, and grows rapidly each year. The amount of contemporary scholarship in business, finance and economics that turns to psychology for insight relating to business institutions, from which legal research can then draw, is much larger. What I want to outline here is an approach to using psychology for corporate...

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