In a well-functioning capital market, profits should be the sole criterion for firm survival; that is, firms reporting losses should disappear... guiding managers to make the right investments: those that produce delayed but real profits.
In 1979, psychologists Daniel Kahneman and Amos Tversky famously posited that losses loom larger than gains in human decision-making... conducting M&A transactions without substance and 'managing earnings' to report profits instead of a loss.
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