The Relationship between Behavioral Finance Indicators and Company Investment Performance with Financial Governance Compliance as a Moderating Variable

Abstract

Purpose: This study aims to examine the influence of behavioral finance factors overconfidence, loss aversion, herd behavior, and emotional bias on corporate investment performance, as well as to evaluate the moderating role of financial governance compliance in mitigating the negative effects of these behavioral biases.

Method: The study adopts a quantitative explanatory research design using secondary data derived from corporate annual reports, investment disclosures, and financial governance compliance documents. The data were analyzed using Moderated Regression Analysis (MRA) to assess both the direct effects of behavioral finance indicators on investment performance and the moderating effect of financial governance compliance.

Findings: The results reveal that all behavioral finance indicators negatively affect corporate investment performance, with herd behavior demonstrating the strongest adverse impact. Conversely, financial governance compliance has a significant positive effect on investment performance and serves as an effective moderating variable by weakening the negative influence of behavioral biases. These findings indicate that strong governance structures reduce the impact of irrational and sentiment-driven managerial decisions.

Implications: The study underscores the importance of strengthening financial governance mechanisms to promote transparency, accountability, and disciplined investment decision-making. Effective governance compliance can enhance investment outcomes by constraining behavioral biases that undermine rational financial judgment.

Novelty/Value: This study contributes to the behavioral finance literature by empirically demonstrating the moderating role of financial governance compliance in the relationship between managerial behavioral biases and investment performance. It offers a governance-based perspective on improving corporate investment resilience amid behavioral uncertainty.