Investigating Behavioral Financial Factors on Corporate Investment Decisions with the Moderating Role of Financial Risk Perception

Document Type : Original Article

Authors

1 Assistant Professor, Department of Accounting, South Tehran Branch, Islamic Azad University, Tehran, Iran

2 Master of Science in Accounting, Department of Accounting, South Tehran Branch, Islamic Azad University, Tehran, Iran

Abstract

Objective: Based on traditional financial theory, investors always make rational decisions based on complete information; however, behavioral finance argues that investors are influenced by their emotions, biases, and cognitive limitations. Therefore, grounded in this rationale, the objective of the present research is to investigate the impact of behavioral financial factors on corporate investment decisions, with the moderating role of financial risk perception.
Method: The method of this research is of the survey-descriptive type. The statistical population consists of individual investors in public joint-stock companies during the fiscal year 1402 (2023-2024). The Cochran formula was used for sample selection, and a structured questionnaire was employed for data collection. The collected data were then analyzed using SPSS software. The investor conditions were as follows: first, they must have been shareholders during the fiscal year 1402 to provide responses regarding one-year returns; second, they must be active shareholders, meaning they engaged in at least four stock purchases and sales within one year. Given the population size of 1,500 investors in this research, based on the Morgan table, the sample size comprises 306 investors. In this study, 415 questionnaires were distributed in the main stock exchange hall and several brokerage firms, serving as the basis for the research. Of these, 306 questionnaires were received completely and correctly by the researcher.
Findings: The research findings indicate that investors' herding behavior influences their financial risk perception and investment decisions. Additionally, financial risk plays a moderating role in the relationship between investors' herding behavior and investment decisions. On the other hand, the results show that investors' behavioral biases have a direct effect on their financial risk perception and investment decisions. Finally, the moderating role of financial risk perception on the relationship between behavioral biases and investment decisions can be confirmed.
Conclusion: In the framework of behavioral finance, traditional financial hypotheses such as market efficiency and complete investor rationality are challenged. This approach posits that financial decision-making, particularly at the corporate level, is influenced by psychological, cognitive, and emotional factors, leading to deviations from optimal behaviors. Behavioral financial factors, such as overconfidence, herding effect, and disposition effect, can steer corporate investment decisions toward irrational choices, such as over-investment in high-risk projects or delaying the sale of loss-making assets. However, financial risk perception—as a subjective assessment of the probability and severity of financial risks—can play a moderating role, altering the intensity of these factors' impact on investment decisions.
Innovation: The innovation of this topic lies in creating an integrated framework for understanding the dynamic interactions between behavioral factors, risk perception, and corporate decisions, which shifts the literature from a focus on mediation toward moderation. This approach not only fills theoretical gaps but also offers practical implications for improving corporate performance during periods of uncertainty.

Keywords

References

Ahmad, M. (2022). The role of cognitive heuristic-driven biases in investment management activities and market efficiency: A research synthesis. International Journal of Emerging Markets. https://doi.org/10.1108/ IJOEM-07-2020-0749.
Ahmad, M. (2024), "The role of cognitive heuristic-driven biases in investment management activities and market efficiency: a research synthesis", International Journal of Emerging Markets, Vol. 19 No. 2, pp. 273-321
Ahmed, S. U., Ahmed, S. P., Abdullah, M., & Karmaker, U. (2022). Do socio-political factors affect investment performance? Cogent Economics & Finance, 10(1). https://doi.org/10.1080/ 23322039.2022.2113496
Aljifri, R. (2023). Investor psychology in the stock market: An empirical study of the impact of overconfidence on firm valuation. Borsa Istanbul Review, 23(1), 93 112
Almansour, B. Y., & Arabyat, Y. A. (2017). Investment decision making among Gulf investors: Behavioural finance perspective. International Journal of Management Studies, 24(1), 41–71.
Chandrakala, M. and Ch, R.K. (2024), "A Study on Behavioural Finance Investment Decisions of Investors in Bangalore", Hamdan, A., Alareeni, B. and Khamis, R. (Ed.) Digital Technology and Changing Roles in Managerial and Financial Accounting: Theoretical Knowledge and Practical Application (Studies in Managerial and Financial Accounting, Vol. 36), Emerald Publishing Limited, Leeds, pp. 181-190
Glowka, G., Eller, R., Peters, M. and Zehrer, A. (2024), "Risk perception in small- and medium-sized hospitality family enterprises", Tourism Review, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/TR-06-2023-0421
Goswami, S., Goswami, B. K., Panicker, A., & Sharma, A. (2020). Exploring the role of emotions and psychology in financial investment decisions in Indian securities market. International Journal of Advanced Science & Technology, 29(1), 532–547. 
Hossain, T., & Siddiqua, P. (2022). Exploring the influence of behavioral aspects on stock investment decision-making: A study on Bangladeshi individual investors. PSU Research Review. https://doi.org/10. 1108/PRR-10-2021-0054 
Kartini, K., & Nahda, K. (2021). Behavioral biases on investment decision: A case study in indonesia. The Journal of Asian Finance, Economics & Business, 8(3), 1231 1240
Khare, T. and Kapoor, S. (2024), "Behavioral biases and the rational decision-making process of financial professionals: significant factors that determine the future of the financial market", Journal of Advances in Management Research, Vol. 21 No. 1, pp. 44-65
Kim, J. J., Dong, H., Choi, J., & Chang, S. R. (2022). Sentiment change and negative herding: Evidence from microblogging and news. Journal of Business Research, 142, 364–376.
Lather, A. S., Jain, S., & Anand, S. (2020). The effect of personality traits on cognitive investment biases. Journal of Critical Reviews, 7(2), 221–229
Madaan, G., & Singh, S. (2019). An analysis of behavioral biases in investment decision-making. International Journal of Financial Research, 10(4), 55–67
Mendonça Flores, Silvia Amélia and Mendes Vieira, Kelmara (2014). Propensity toward indebtedness: An analysis using behavioral factors, Journal of Behavioral and Experimental Finance, Volume 3, Pages 1–10
Menon, M., Huber, R., West, D. D., Scott, S., Russell, R. B., & Berns, S. D. (2023). Community-based approaches to infant safe sleep and breastfeeding promotion: A qualitative study. BMC Public Health, 23(1)
Putri Pa, A. N., Wiksuana, I., Suartana, I. W., & Sri Artini, L. G. (2022). The influence of social and personal factors in individual investment decision making. Quality - Access to Success, 23(191), 80–88
Raveendra, P. V., Rizwana, M., Singh, P., Santhosh Kumar, S., & Vijaya Kumar, G. (2018). Performance appraisal biases and behavioral biases in decision making: An empirical study. International Journal of Mechanical Engineering and Technology, 9(6), 312–318
Stella, G. P., Cervellati, E. M., Magni, D., Cillo, V., & Papa, A. (2022). Shedding light on the impact of financial literacy for corporate social responsibility during the Covid-19 crisis: Managerial and financial perspectives. Management Decision, 60(10), 2801–2823
Journal of Finance and Corporate Sustainability
Volume 1, Issue 2 - Serial Number 2
February 2026
Pages 27-51

Files

History

  • Receive Date: 09 August 2024
  • Revise Date: 11 August 2025
  • Accept Date: 08 October 2025
  • First Publish Date: 21 January 2026
  • Publish Date: 21 January 2026

Share

How to cite

Statistics