Financial crises, rational and irrational exuberance, institutional rationality, corporations - finance


"The last financial crisis could have been caused by rational and irrational exuberance. (That is, overreaction by agents to both good and poor signals in the financial markets). The problem is further exacerbated by institutional rationality. Rule following is one mode of behavior in dual-mode institutional rationality (Redmond 2004; Verstegen 2006). Rule-following behaviors hamper agents’ abilities to adapt to new circumstances. It is shown that management structures where both upper-level and field managers exhibit purpose-seeking behaviors is necessary for corporations to overcome any type of economic and financial volatility. "

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