Not just numbers: the hidden human forces behind capital structure choices

What the paper says

Purpose This study proposes a unified framework for understanding capital structure decisions by integrating economic, psychological, sociological and biological perspectives. It challenges traditional models focused on rational optimization, highlighting how bounded rationality, social influences and adaptive behavior shape real-world decisions. This study aims to offer a more holistic, behaviorally grounded understanding of how finance managers navigate complex capital structure choices. Design/methodology/approach A unified framework was first developed through an interdisciplinary literature review that integrated economic, psychological, sociological and biological perspectives. This was followed by a qualitative, phenomenological study involving 16 semi-structured interviews with finance managers in the Delhi NCR region. Findings The unified framework revealed that psychological, sociological and biological forces jointly influence capital structure decisions. The qualitative study confirmed that managers often satisfice, rely on intuition, conform to group norms and adapt based on past crises. Themes such as psychological forces, group influence, norms, organizational culture, stress, fatigue, adaptive behavior and preference for funding reliability emerged consistently. Research limitations/implications The study expands capital structure theory through interdisciplinary integration and qualitative validation. However, findings are context-specific, which limits their generalizability. Future research could apply the framework across sectors and geographies. Social implications Understanding nonfinancial drivers of capital structure decisions can enhance corporate accountability, promote ethical financing behavior, and inform policies that support financially sound, psychologically aware and socially inclusive decision-making. Originality/value This study presents a novel, unified framework that integrates psychological, sociological and biological insights into capital structure theory, supported by qualitative data. It advances a more holistic, behaviorally grounded understanding of financial decision-making.