AN EXAMINATION OF INVESTMENT DECISION-MAKING STRATEGIES IN CORPORATE FINANCE

Abstract

Investment decision-making remains a critical challenge in corporate finance, particularly in environments characterized by volatility, information asymmetry, and capital constraints. This study examines the strategic approaches firms adopt when allocating financial resources and how these strategies influence organizational performance. The problem statement centers on the inconsistency in investment outcomes despite the use of conventional appraisal techniques such as Net Present Value and Internal Rate of Return, suggesting the presence of behavioral and structural inefficiencies in decision-making processes. The study is grounded in Modern Portfolio Theory and Behavioral Finance Theory, providing a dual lens to analyze both rational optimization and cognitive biases affecting corporate investment choices. A quantitative research methodology was employed, supported by a descriptive and inferential design. Secondary panel data were collected from annual financial statements of 50 publicly listed non-financial firms over a five-year period (2019–2024). The results indicate that firms applying diversified investment strategies with structured risk assessment frameworks achieve significantly higher return on investment (ROI) and reduced financial volatility. Behavioral factors such as overconfidence and loss aversion were found to negatively influence capital budgeting efficiency. Measurable outcomes show a 12–18% improvement in investment efficiency among firms using integrated decision models compared to traditional approaches. The study concludes that hybrid decision frameworks enhance corporate investment performance by balancing analytical rigor with behavioral awareness.