Volume 2 - Issue 4, July - August 2026

While traditional finance models are built on the foundational assumption of rational decision-making conceptualizing the executive as a dispassionate “Homo Economicus” this research challenges that industry myth by exploring the “Homo Sapiens” beneath the professional veneer. Grounded in the critical chasm between the cold, normative logic of traditional finance and the visceral reality of human intuition, the study investigates the pervasive influence of cognitive biases on high-stakes corporate decision-making within the Indian corporate sector. By integrating Behavioral Finance Theory (BFT) and Upper Echelons Theory (UET), the research examines how the subjective psychology of senior leaders filtered through their personalized cognitive lenses scales up to dictate firm-wide strategy and capital allocation. This study utilizes a Sequential Explanatory Mixed Methods design, incorporating a high-fidelity survey of 169 senior executives and board members followed by deep-dive qualitative interviews to capture the human story behind the statistical data. The research focuses on a taxonomy of “unseen characters” that haunt the boardroom: Overconfidence, the Sunk Cost Fallacy, Confirmation Bias, and Groupthink. A core contribution of this study is the development of the “Synergistic Failure Model,” which demonstrates that these biases do not act in isolation; rather, they form a mutually reinforcing “Invisible Web.” Regression analysis quantifies a profound “behavioural tax” on capital, revealing that 27.1% of the variance in Investment Efficiency is predicted by this psychological friction. Crucially, the study identifies an “Efficiency Perception Paradox,” where biased leadership teams are statistically more likely to perceive their decision-making as highly efficient, effectively “hallucinating success” while locking capital into “zombie projects.” The article concludes that technical models often serve as mere facades for rationalising gut-driven decisions, and proposes a shift from “Compliance Hygiene” to a “Decision Hygiene” toolkit institutionalising structured interventions such as pre-mortems, mandatory kill criteria, and the formal role of the “Devil’s Advocate” to transform the human element from a source of systemic weakness into a source of disciplined organizational strength.

Mohan V, Dr S Johnsi,"Behavioural Finance in Corporate Decision-Making" International Journal of Advanced Multidisciplinary Research and Educational Development, V2(4): Page(87-92) July - August 2026. ISSN: 3107-6513. www.ijamred.com. Published by Scientific and Academic Research Publishing.