The Relationship Between Financial Performance Metrics and Strategic Decision-Making in Multinational Corporations

Posted: Dec 10, 2016

• Logan Thomas
• Logan Thompson
• Logan White

Abstract

This research investigates the complex interplay between financial performance metrics and strategic decision-making processes within multinational corporations (MNCs), proposing a novel neuroeconomic framework that integrates behavioral finance with computational decision science. Traditional approaches to corporate strategy have largely treated financial metrics as objective inputs to rational decision models, overlooking the cognitive and organizational mechanisms through which these metrics influence strategic choices. Our study introduces a multi-level analytical approach that examines how different categories of financial metrics—ranging from conventional accounting measures to advanced value-based metrics—are processed, interpreted, and weighted by decision-makers across hierarchical levels and geographic contexts. Through a mixed-methods design combining quantitative analysis of strategic investment decisions across 127 MNCs with qualitative case studies of decision-making processes in 12 global corporations, we demonstrate that the relationship between financial metrics and strategic outcomes is mediated by organizational interpretation systems, cognitive biases, and institutional contexts. Our findings reveal three distinctive patterns: first, the dominance of short-term accounting metrics in strategic decisions creates systematic misalignments with long-term value creation; second, the cognitive complexity of advanced financial metrics often leads to their ritualistic adoption rather than substantive integration into decision processes; third, the geographic and cultural diversity of MNCs generates significant variations in how financial metrics influence strategic choices across different subsidiaries. This research contributes to the literature by developing a comprehensive theoretical model of financial metric interpretation in strategic decision-making and by providing empirical evidence of the contextual factors that moderate this relationship. The implications extend to both theory development in strategic management and practical applications in corporate governance and performance measurement systems design.