BEHAVIORAL FINANCE INSIGHTS TO IMPROVE MANAGERIAL DECISION MAKING
DOI:
https://doi.org/10.65009/f6wxhk55Keywords:
Behavioral Biases, Behavioral Finance, Cognitive Heuristics, Decision Architecture, Emotional Decision-Making, Managerial Judgment, Nudging Mechanisms, Prospect Theory, Risk Perception, Strategic Decision-Making, Behavioral Diagnostics, Managerial Psychology,,Abstract
Behavioral finance provides a powerful lens for understanding how cognitive biases,
heuristics, and emotional influences shape managerial decision-making. Traditional financial
models assume rationality, yet managers frequently rely on intuitive judgments that deviate
from optimal choices, creating inefficiencies in capital allocation, risk assessment, and strategic
planning. This research examines key behavioral finance constructs—overconfidence, loss
aversion, anchoring, herd behaviour, mental accounting, and framing effects—to analyze their
impact on managerial decisions across corporate finance, investment evaluation, and
organizational strategy. Using empirical datasets, experimental simulations, and behavioral
scoring models, this study highlights how irrational tendencies affect forecasting accuracy,
budgeting outcomes, and risk-taking patterns. Further, the study proposes an integrated
Behavioral Insight Framework (BIF) using bias diagnostics, predictive analytics, and nudging
mechanisms to guide managers toward more rational financial decisions. The findings
demonstrate that incorporating behavioral finance insights leads to improved decision
accuracy, enhanced risk management, and stronger strategic consistency. The study ultimately
contributes to the development of behaviorally informed managerial policies that drive better
organizational performance and financial stability.
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