International Journal of Research in Economics and Social Sciences (IJRESS) Available online at: http://euroasiapub.org Vol. 7 Issue 12, December- 2017 ISSN(o): 2249-7382 | Impact Factor: 6.939 | International Journal of Research in Economics & Social Sciences Email:- editorijrim@gmail.com, http://www.euroasiapub.org (An open access scholarly, peer-reviewed, interdisciplinary, monthly, and fully refereed journal.) 349 Misperception of Optimism Culminates in Erroneous Corporate Financial Decision Making- A Review Kannadas S* Assistant Professor – Finance L. Gandhi** Assistant Professor- OB/HRM Shri Dharmasthala Manjunatheshwara Institute for Management Development (SDMIMD) No. 1, Chamundi Hill Road, Siddharthanagar Post Mysore - 570011, Karnataka, INDIA. Abstract In the 21 st century corporate domain, the decision making role has become crucial. Especially, financial decisions are vital for the sustained survival in the long run. The financial decision makers’ designation may vary from CFO to Chairman but the ultimate expectation from them is to perform for the growth of the organisation. There are three major areas of financial decision making namely Investment decisions, financing decisions and dividend decisions. There are two different types of decision makers in the corporate based on their approach towards the situation; rational decision makers and irrational decision makers. Irrespective of the types, their objective is to optimize or to determine an ultimate solution for an existing problem or an easy path to develop the organisation where they are employed. Even though there are plentiful formulae, methodologies and numerical analysis before taking a final financial decision, there is a prologue for all those i.e. human psychology or behavioral traits. Each and every individual at the decision making level in the corporate ought to be undergoing this stage irrespective of their age, gender, income, authority and ethnicity. Inevitably there are both positive side and negative sides at this stage. If the psychological thoughts and behavioral traits are logical, it lead to optimistic approach while taking a decision. On the other hand if the same are illogical, it paves way for overconfidence and culminates in erroneous decision making and hamper the expansion and growth in the long run. In this paper, the authors have identified various literatures related to the topic, reviewed the literature from different dimensions and suggested a matrix for financial decision makers Key words: Managerial optimism, Overconfidence in decision-making, Financial decision making matrix