Behavioral Accounting: The Role of Cognitive Biases in Financial Decision-Making

Abstract

Behavioral accounting examines the impact of psychological factors, particularly cognitive biases, on financial decision-making. Cognitive biases such as overconfidence, anchoring, and loss aversion significantly influence how individuals process information and make financial decisions. This research paper explores the role of these biases in accounting and financial decision-making, highlighting their effects on both individual accountants and organizational financial practices. By integrating insights from psychology and behavioral economics, this paper presents a comprehensive review of existing literature on cognitive biases in financial decisions. Moreover, it provides implications for accounting practices, with a focus on improving decision-making and mitigating the adverse effects of biases in financial environments.