Human Biases, Financial Choices and HR Systems: Evidence from a Systematic Survey of Literature

Rajib Bhattacharya; Lopamudra Roy; Smita Chakraborty; Pramit SenGupta

Human Biases, Financial Choices and HR Systems: Evidence from a Systematic Survey of Literature

Author(s)	Rajib Bhattacharya, Lopamudra Roy, Smita Chakraborty, Pramit SenGupta
Country	India
Abstract	Traditional models of finance and human resource management (HRM) assume that individuals within organisations make rational and well-informed financial decisions. However, a growing body of evidence from behavioural economics and behavioural finance challenges this assumption, demonstrating that cognitive biases, heuristics, and contextual constraints systematically influence both employee and managerial choices. Against this backdrop, the present study undertakes a systematic review of the literature at the intersection of behavioural finance and HRM, with a particular focus on employee cognitive biases and firm-level financial decision-making. Adopting a PRISMA-aligned review methodology, the study synthesises theoretical, empirical, and methodological contributions spanning retirement saving behaviour, financial literacy, incentive design, employee ownership, managerial biases, and scarcity effects. The review highlights those behavioural deviations e.g. inertia, present bias, overconfidence, loss aversion, and mental accounting, play a central role in shaping workplace financial outcomes. Evidence suggests that HR policies grounded in rational-choice assumptions often fail to achieve intended objectives, while behaviourally informed interventions e.g. defaults, commitment devices, simplified choice architectures, and context-sensitive programs, consistently improve participation and decision quality. At the firm level, the review shows that managerial and professional biases influence capital allocation, risk-taking, and governance outcomes, underscoring the strategic importance of HR systems in mitigating behavioural distortions. At the employee level, financial stress and scarcity emerge as powerful moderators that limit the effectiveness of education-based interventions unless accompanied by structural support. By integrating insights across disciplines, this study contributes a comprehensive behavioural HRM framework that links individual cognition, organisational context, and financial outcomes. The findings offer clear implications for HR policy design and identify critical gaps for future research, particularly in emerging economies, longitudinal analysis, and welfare-based evaluation of behavioural interventions.
Keywords	Behavioural finance; Human resource management; Cognitive biases; Employee financial decisions; Choice architecture
Discipline	Business Administration
Published In	Volume 4, Issue 1, January-February 2026
Published On	2026-02-11

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Human Biases, Financial Choices and HR Systems: Evidence from a Systematic Survey of Literature

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