Authors: H. Kent Baker; Satish Kumar; Harsh Pratap Singh
Addresses: Kogod School of Business, Department of Finance and Real Estate, American University, 4400 Massachusetts Avenue, NW, Washington, DC 20016, USA ' Department of Management Studies, Malaviya National Institute of Technology (MNIT), Jaipur 302017, India ' G.L. Bajaj Institute of Management and Research, Knowledge Park III, Greater Noida, India
Abstract: People are not fully rational and their decisions suffer from errors and biases. Because behavioural finance research focuses on investor irrationality, additional attention should examine managerial decision-making. This study helps to fill this gap by addressing three objectives: (a) to identify whether owners of small and medium-sized enterprises (SMEs) in India are prone toward behavioural bias; (b) to assess the impact of these biases on their decision-making; and (c) to determine whether age, experience, education, and gender affect their propensity to exhibit behavioural biases. Using responses from 154 Indian SME owners, the study uses logistic regression to assess how demographic variables affect behavioural biases. The evidence shows that SME owners are prone to self-attribution, overconfidence, and loss aversion, but not anchoring. Differences exist in the working capital management decisions of owners prone to behavioural biases. Gender, age, and experience significantly affect the propensity to exhibit behavioural biases.
Keywords: behavioural biases; overconfidence bias; self-attribution bias; loss aversion bias; anchoring bias; working capital management.
International Journal of Management Practice, 2018 Vol.11 No.3, pp.259 - 283
Received: 27 Jun 2017
Accepted: 22 Nov 2017
Published online: 24 Apr 2018 *