The Role of Neuro Cognitive Financial Factors on Sustainable Performance of MSMES

Neuro-cognitive factors, Behavioural finance, MSMEs, Sustainable performance, Cognitive biases, Financial decision-making, Risk perception, Financial literacy, Emotional intelligence, Entrepreneurial cognition, Heuristics, Business resilience, Innovation capability, Strategic management, Neurofinance

Sustainable performance of Micro, Small, and Medium Enterprises (MSMEs) has turned out to be a hot spot of interest in the dynamic and uncertain economic settings. This research paper analyses the contribution of the neuro-cognitive financial factors in determining the long-term sustainability and performance outcome of MSMEs. Based on the findings of behavioural finance and cognitive psychology, the study examines the effects of cognitive biases, emotion regulation, risk perception and the financial decision-making processes on the managerial effectiveness and organizational resilience. The research is based on the mixed-method approach, as it is complemented by the primary data gathering on the owners of MSMEs and managers, as well as the secondary data on the financial reports and industry databases. The major neuro-cognitive variables to be examined are overconfidence, loss aversion, decision-making based on heuristics, and financial literacy that help to evaluate their effectiveness in terms of financial stability, innovation ability, and adaptive performance. The results show that positive neuro-cognitive qualities, such as rational assessment of risk and emotional intelligence, have a strong positive impact on strategic decision-making and lead to sustainable development. On the other hand, some cognitive distortions, like overconfidence and anchoring bias, adversely influence financial planning and resource allocation, making it more susceptible to market changes. The paper also emphasizes the mediating effect of the financial literacy in alleviating the negative cognitive impact and enhancing resilience. Moreover, the combination of fintech products and data-driven decision support systems proves to enhance cognitive efficiency and financial performance of MSMEs. The study is relevant to the emerging field of intersection between neurofinance and entrepreneurship as it delivers a more subtle picture of how mental and psychological aspects affect the sustainability of a business. The paper provides policy implications to the policymakers, financial institutions and MSME stakeholders to develop specific intervention, training and supportive ecosystems to increase cognitive awareness, and financial ability. Finally, informed and balanced decision-making may be highly effective in enhancing sustainable operations of MSMEs in changing economic environments.