Abstract:

Behavioral prejudice results in decision making in which reasoning is influenced by emotions, usually leading to irrational financial decisions. The interest in prejudice caused by faulty cognitive reasoning or emotions that affect individual financial outcomes has seen the emergence of research on behavioral finance as a concept.The nerve in the process of decision making is how the investor perceives risk. Risk is a significant factor in analyzing decision situations under uncertainty. Unfortunately, majority of people are not consistent in how they approach risk. Although investors intention is to act rationally and make informed decisions, behavioral aspects affect the decision process and cause investors to deviate from the normative models. This article sought to assess the moderation effect of behavioral prejudice on the relationship between strategic investment procedures and operational performance of real estate firms in Kenya in the period 2018-2022. It focused on three variables strategic investment procedures as the independent variable, operational performance as the dependent variable and behavioral prejudice being the moderator variable. Theoretical literature illustrates individual relationships between these variables but the combined influence of the three variables on operational performance has not been previously studied.A correlational survey design and census sampling method were used to draw 231 registered real estate investment firms in Kenyas capital city of Nairobi. Primary data was gathered using structured questionnaires to collect data from 231 senior financial managers and analyzed by regression analysis. Behavioral prejudice and strategic investment procedures as predictor variables had a significant R² of 32.8% (p<0.01). The R² of incorporating the interaction term between behavioral prejudices and strategic investment procedures was  R²=39.7% (p<0.01) change of R²=6.8% (p<0.01) implying that behavioral prejudices significantly moderates the relationship between the independent and dependent variables. In conclusion,strategic investment procedures significantly predict operational performance but incorporation of behavioral prejudices significantly enhances the predictive power. The study recommends real estate firms focus on behavioral prejudices so as to make informed and accurate investment decisions thus enhancing operational performance. Contrary to prior research, the study has shown that strategic investment procedures and behavioral prejudices interacting together affects Operational performance thus bringing new knowledge to the area of finance.

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