EFFECT OF MANAGERIAL REGRET AVERSION ON RANKING OF FINANCING DECISIONS BY FINANCIAL MANAGERS OF FIRMS LISTED IN NSE

Abstract

Purpose: The purpose of this study was to determine the effect of regret aversion on ranking of financing decisions by financial managers of firms listed in NSE.Methodology: The study employed a positivism philosophy and a descriptive correlational design. A two tier sampling was applied where; a census at the firm level and purposive sampling at financial manager level resulting with a selection of the top 3 senior and middle financial managers from each firm. The target population was the top three financial managers in each of the firms listed in the NSE resulting in a target population of 192 financial managers from a population of 64 firms. A questionnaire was utilised to collect primary data from the target population. Descriptive statistics, Analysis of Variance (ANOVA) and multinomial logit regression were employed in data analysis.Results: There was a statistically significant relationship between regret aversion and ranking of financing decisions. Based on the study findings, it was concluded that regret aversion affected financial decisions ranking as regret averse managers would chose internal financing over debt and equity. This is because a regret adverse manager seeks to reduce its firms’ total risk by using low of external funding including debt.Unique Contribution to Theory Practice and policy: Financial managers are advised to consider referring to decision makers who have experience in money matters especially if the financial matter is complicated. To avoid being adversely affected by regret aversion, financial managers could pay attention to budgeting and long term financial planning.