Unveiling the Psychological Dimensions of Human Capital Investments: A Qualitative Exploration of Firm Valuation in Indian Listed Companies

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DOI: https://doi.org/10.5281/zenodo.19183753

Moni Mishra and Priyam Ahuja (Lal Bahadur Shastri Institute of Management, Delhi)

This qualitative study examines how psychological factors that link to human capital investments can contribute to firm valuation of publicly traded firms in India. Thematic analysis from the interviews with 33 executives from 9 organizations revealed 5 major categories of findings: cognitive biases influencing decision-making; psychological ownership as a mechanism linking human capital investments to organization value; institutional/cultural moderators of human capital strategy; reluctance to disclose human capital investments; and decision-making processes based on both analytical and intuitive thinking. The results show that recency and anchoring biases are consistently found to be influential on investment decisions. Additionally, psychological ownership is shown to be an important mediator through which human capital investments result in organizational value. Power distance and collectivism, two of the Indian culture’s most salient dimensions create unique psychological and behavioral dynamics that affect human capital investment/strategy. The results of this study extend the Resource Based View (RBV) and the Behavioral Decision Theory (BDT) paradigms by introducing and integrating psychological paradigms. The results provide valuable and actionable insight for corporate leaders, human resource practitioners, investors, and policy makers. Future research directions may include quantitative testing of the model developed in this study; cross-cultural comparison studies of the degree to which the model generalizes to other cultures and countries; and intervention studies assessing the efficacy of debiasing interventions aimed at reducing recency and anchoring biases.