Do Investment Decisions Mediate the Effect of Cognitive and Emotional Bias on Financial Performance in Women SMEs?
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Abstract
Small and medium-sized enterprises (SMEs) can continue to grow due to the contribution of women entrepreneurs. The performance of SMEs and investment decisions made by women entrepreneurs have been proven to have a crucial role in a country, especially in economic growth. This research highlights the role of cognitive and emotional biases in investment decisions and the financial performance of female SMEs. Cognitive bias is proxied by overconfidence, representativeness, and herding biases. Emotional bias is proxied by loss aversion bias. The novelty of this study lies in treating investment decisions as an intervening variable. The study population comprised women-owned SMEs in two large provinces in Indonesia: Central Java and the Special Region of Yogyakarta. The sample used in this study was 130 SMEs. The results provide empirical evidence on the role of herding bias and loss aversion in improving investment decisions. The variables of overconfidence and representativeness bias were associated with improved company financial performance. The role of investment decisions as a mediating variable was not proven for all tested variables. This study provides theoretical contributions and practical implications for female SME owners and the government.
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