The Influence of Behavioral Biases on Financial Managers’ Decision Making

Abstract

Behavioral Finance becomes more important in connection with the massive work of financial professions, when the accounting and financial work created should ensure the uninterrupted functioning of finances in conditions of their permanent orientation to changing human needs. In conditions where the algorithms created on the basis of classical finances do not take into account the irrational moments of human behavior, behavioral tools become a means to prevent crashes of new mechanisms for finance functioning in a new digital economy. The purpose of the article is to study the basic theories as well as the stages of formation and development of behavioral finance as an important area of financial research and to justify the need for its further evolution in modern conditions. The article consistently reveals the economic essence and role of behavioral finance and the principles of effective interaction of business entities in the context of behavioral economics, which should be based on the principles of trust, information transparency, coherence of interests, responsibility, compliance with ethical standards, financial inclusion, and mutual benefit. The necessity of behavioral finance study as an independent direction of modern financial research is considered. The basic theories and stages of the formation and development of behavioral finance are highlighted. The article outlines the criteria for substantiating and choosing managerial decisions. The features of the behavioral model and factors influencing the making of an irrational decision by a business entity are revealed. The most common effects that provoke irrational behavior of economic entities are highlighted. Some aspects of behavioral finance’s influence on the decisions of enterprises’ financial managers are revealed with the definition of the role of incentive motives and psychological factors in the choice of an individual’s financial behavior model and their investment decision-making. The necessity of further research on individuals’ behavioral strategies in modern financial research is grounded model and their investment decision-making. The necessity of further research on individuals’ behavioral strategies in modern financial research is grounded