THE IMPACT OF INVESTOR BEHAVIORAL BIASES ON INVESTMENT DECISION-MAKING: THE MODERATING ROLE OF FINANCIAL MANAGEMENT CAPABILITY

Abstract

The research objective was to test the influence of behavioral biases on investment decision making with moderating effect of financial management capability. Data were collected from 305 investors using convenient sampling technique. PLS-SEM results shown that all behavioral biases positively and significantly effect to investment decision making, which is indicating that investors' choices are substantially influenced by psychological and heuristic factors rather than solely by rational financial considerations. The results further reveal that financial management capability significantly strengthens the relationships between regret aversion, representativeness bias, disposition effect, loss aversion, herding behavior, and investment decision making. However, financial management capability does not significantly moderate the relationship between cognitive dissonance and investment decision making, suggesting that influence of this bias may operate relatively independently of financial management capability. Robustness analysis further confirms the stability of the main findings, with the significant direct and moderating relationships remaining consistent across alternative analytical specifications. The study with the specific findings contributing literature through demonstrating that moderating influence of financial management is bias specific rather than universal. The findings also provide practical implications for investors, financial advisors, financial institutions, and policymakers by highlighting the importance of behavioral awareness and financial management capabilities in improving investment decision quality.