The growing field of behavioral economics (BE) has revolutionized the way we look at economic behavior at micro and macro levels. Importance of foreign direct investment (FDI) appeals for analysis of decisions made regarding it to be assessed from expanding view of BE. This research provides overview of previous studies and focuses on the case of Bosnia and Herzegovina (B&H) as representative of emerging markets to investigate motivations for investing into this country by temporarily present foreign companies. Empirical analysis was based on the questionnaire that was disseminated among foreign investors to B&H. Questionnaire contained motivations for investing in B&H, where examined motivation factors were divided in two groups; namely irrational and rational ones. Choice of methodology was narrowed due to moderate sample size, but consisting of quality the sample members. In order to analyze data, descriptive statistics, correlation analysis and regression analysis were used. By regressing two groups of predictors on annual amount of foreign investments to B&H, it was shown that the highest motivation for investing was business instinct.

This research examines the determinants of firms’ investment introducing a behavioral perspective that has received little attention in corporate finance literature. The following central hypothesis emerges from a set of recently developed theories: Investment decisions are influenced not only by their fundamentals but also depend on some other factors. One factor is the biasness of any CEO to their investment, biasness depends on the cognition and emotions, because some leaders use them as heuristic for the investment decision instead of fundamentals. This paper shows how CEO emotional bias (optimism, loss aversion and overconfidence) affects the investment decisions. The proposed model of this paper uses Bayesian Network Method to examine this relationship. Emotional bias has been measured by means of a questionnaire comprising several items. As for the selected sample, it has been composed of some 100 Tunisian executives. Our results have revealed that the behavioral analysis of investment decision implies leader affected by behavioral biases (optimism, loss aversion, and overconfidence) adjusts its investment choices based on their ability to assess alternatives (optimism and overconfidence) and risk perception (loss aversion) to create of shareholder value and ensure its place at the head of the management team.