A Hybrid Approach to Corporate Investment Efficiency. A Five-Year Panel Study of Listed Firms in Russia

Abstract

Corporate capital allocation remains a critical yet highly volatile strategic challenge, particularly under conditions of market unpredictability and resource scarcity. Despite the widespread adoption of traditional financial metrics such as Net Present Value (NPV) and Internal Rate of Return (IRR), empirical corporate outcomes remain highly inconsistent. This variance suggests that traditional models fail to account for structural blind spots and cognitive biases inherent in managerial decision-making. This study bridges this gap by evaluating capital budgeting through a dual framework: the rational, data-driven principles of Modern Portfolio Theory (MPT) and the psychological insights of Behavioral Finance. Utilizing a quantitative empirical approach, we analyzed five years of longitudinal financial data (2021–2025) from 50 publicly listed, non-financial corporations. This study bridges this gap by evaluating capital budgeting through a dual framework: the rational, data-driven principles of Modern Portfolio Theory (MPT) and the psychological insights of Behavioral Finance. Utilizing a quantitative empirical approach, we analyzed five years of longitudinal financial data (2021–2025) from 12 publicly listed, non-financial corporations. The findings indicate that firms utilizing diversified asset allocation strategies combined with structured, objective risk-assessment frameworks achieved significantly higher Return on Investment (ROI) and lower cash flow volatility. Conversely, managerial overconfidence and loss aversion consistently degraded capital budgeting efficiency. Quantitatively, firms that adopted integrated, hybrid decision-making models demonstrated a 12 to 18% increase in investment efficiency relative to peers relying strictly on traditional evaluation metrics. This study demonstrates that optimal corporate performance requires a synthesis of robust quantitative analytics and active mitigation of behavioral biases. The resulting hybrid decision-making paradigm offers actionable insights for improving capital efficiency and long-term corporate performance.