THE EFFECT OF HERDING, OVERCONFIDENCE, AND RISK TOLERANCE ON INVESTMENT DECISIONS

Laili  Azka Isnaini; Mohammad  Yunies Edward

Laili Azka Isnaini Universitas Islam Nahdlatul Ulama Jepara
Mohammad Yunies Edward Universitas Islam Nahdlatul Ulama Jepara

Abstrak

Introduction/Main Objectives: This research aims to analyze the influence of herding, overconfidence, and risk tolerance on investment decisions made by SMEs in Jepara. This topic is considered important because, in practice, SME investment choices are often influenced by psychological factors, not solely based on logical considerations or rational analysis. Background Problems: The increasing number of MSME actors in Jepara reflects significant local economic growth; however, their investment decisions are still largely influenced by psychological factors such as herding, overconfidence, and risk tolerance, rather than by objective financial considerations. Novelty: This study contributes to the literature by offering insights into investment behavior of SMEs, which has been relatively underexplored, as most existing research focuses on individual investors in the capital market. Research Methods: This research employs a quantitative approach using a survey method involving 130 SMEs in the food and beverage sector in the Jepara region. The sample was selected using a a non-probability sampling method based on accessibility was employed, followed by data analysis through multiple linear regression using an analytical technique based on Partial Least Squares (PLS). Finding/Results: This research reveals that overconfidence contributes positively to the investment decisions of SME actors. Meanwhile, the factors of herding behavior and risk tolerance do not exhibit a meaningful relationship with those investment decisions. Conclusion: The confidence factor of business actors plays an important role in determining investment decisions among SMEs in Jepara. Therefore, strengthening financial literacy and understanding psychological biases are necessary to ensure that investment decisions are made more logically and based on well-considered judgments.

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