Rationality of Management Buyout from the Behavioural Economics Theory

The theory of behavioral economics examines the behavior of individuals in markets in order to examine, explain and predict individual behavior. The psychology of behavior has evolved in order to explain the impact of emotions and most common cognitive errors in the decision-making process of individuals. Psychological and sociological aspects, which can be explained by a qualitative case study, are used to understand their behavior. In this paper we shall analyse the rationality of management behavior from the Behavioral Economy perspective through a plural case study. The conclusions drawn from our research show that non-economic factors, such as overconfidence, arrogance, greed and optimism significantly contribute to the management buyout decision.