The undeniable role of cognitive biases and bounded rationality in managerial decision making is confirmed by previous researchers they further bring into light the ultimate behavioral cost that firms have to pay due to undesired outcomes of the decisions situations (Simon, Houghton & Aquino, 1999). This study seeks ways to resolve the unanswered questions about overconfidence bias and ambiguity aversion bias in manager''s financial decision making in a cross cultural environment. For this purpose survey based data has been collected from executives/ managers of firms listed on Pakistan stock exchange and New York Stock Exchange. Results achieved found that overconfidence bias is more significantly playing role in managerial decision making for USA while ambiguity aversion bias has strong effect on the decisions taken by Pakistani managers. It has been found that manager''s risk perception is a significant mediator for financing, Investment, and asset management decisions in Pakistan while it is significant for all decisions in case of USA. Study further applied moderation and moderated mediation through use of process by Hayes, 2013 and found the conditional indirect effect of uncertainty avoidance on the relationship between ambiguity aversion bias of managers and financial decisions via RP. Consequently this study has reached to extract the hidden facts and solutions to the observed issues for underdeveloped country firms through cultural differences. The cross cultural research work can also help the firms in both countries to bring integrated solutions to the problems observed. The study has found that in the decision making process of company, the managers in Pakistan avoid dividend payments to shareholders due to fear bankruptcy and shortage of cash and raise funds via debt financing. Results concluded that they further avoid investments due to ambiguity about the risk of loss and ultimately lead the firms towards less growth in long run. Conversely in case of USA results showed that risk perception play significant role for all decisions. Findings showed that US managers being more overconfident perceive external financing as less expensive, so they overinvest using these external funds. Consequently firm growth and cash flow also continued to keep the firm from insufficiency of funds. Furthermore these inflows also help the US firm to announce dividends on interim basis. These ground realities pertaining to growth and capital structure guides that firms should take special measures to control these biases. It will help to overcome micro as well as macro level shocks i.e. assistance to make optimal capital structure, increase in return on investments, maintaining balance between dividend payment and asset management decisions and ultimately reduce the behavioral cost of firm.
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