Overconfidence Bias in Financial Decision-Making: Evidencefrom Culinary MSMEs in Banjarmasin, Indonesia
DOI:
https://doi.org/10.14419/vn7scf57Keywords:
Overconfidence Bias; Financial Decision-Making; Illusion of Control; Culinary Micro-Enterprises; Behavioral Finance; BanjarmasinAbstract
This study examines the role of overconfidence bias in shaping financial decision-making among culinary MSMEs in Banjarmasin, Indonesia. Although overconfidence has been recognized as a behavioral bias influencing financial decisions, empirical evidence in the context of MSMEs in developing countries is still limited. This study used a quantitative approach, collecting data from 80 culinary MSMEs, which were then analyzed using Partial Least Squares–Structural Equation Modeling (PLS-SEM). Overconfidence was operationalized as a multidimensional construct consisting of overestimation, overprecision, and illusion of control. The results showed that only the illusion of control dimension had a positive and significant effect on financial decision-making, while overestimation and overprecision did not show a significant effect. This finding indicates that MSMEs tend to rely on subjective perceptions of self-control rather than measurable financial analysis in making financial decisions. This study contributes to the behavioral finance literature by highlighting the heterogeneity of overconfidence dimensions in the micro-enterprise context and providing practical implications for the development of behavior-based financial literacy programs for entrepreneurs in emerging markets.
References
Ariefin Addinpujoartanto, N., & Darmawan, S. (2020). Pengaruh Overconfidence, Regret Aversion, Loss Aversion, dan Herding Bias Terhadap Keputusan Investasi di Indonesia. Jurnal Riset Ekonomi Dan Bisnis, 19–30. http://journals.usm.ac.id/index.php/jreb. https://doi.org/10.26623/jreb.v13i3.2863.
Awais, M., Fahad Laber, M., Rasheed, N., & Khursheed, A. (2016). Impact of Financial Literacy and Investment Experience on Risk Tolerance and Investment Decisions: Empirical Evidence from Pakistan. International Journal of Economics and Financial Issues, 6(1), 73–79. http:www.econjournals.com.
Bakar, S., & Yi, A. N. C. (2016). The Impact of Psychological Factors on Investors’ Decision Making in the Malaysian Stock Market: A Case of Klang Valley and Pahang. Procedia Economics and Finance, 35, 319–328. https://doi.org/10.1016/S2212-5671(16)00040-X.
Barber, B. M., & Odean, T. (2001). Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment*. The Quarterly Journal of Eco-nomics. https://doi.org/10.1162/003355301556400.
Barberis, N., & Thaler, R. (2003). A Survey of Behavioral Finance. In Handbook of the Economics of Finance. https://doi.org/10.1016/S1574-0102(03)01027-6.
Benayad, K., & Aasri, M. R. (2023). Behavioral Biases and Investment Decisions of SME Managers: Empirical Analysis within the Moroccan Con-text. International Journal of Financial Studies, 11(4). https://doi.org/10.3390/ijfs11040120.
Camerer, C., & Lovallo, D. (1996). Overconfidence and Excess Entry: An Experimental Approach. Division of The Humanities and Social Sciences.
Damodaran, A. (2014). Applied Corporate Finance (Fourth).
Dinas Kebuadayaan, K. O. dan P. (2025). Jumlah Pelaku Ekonomi Kreatif Menurut Kategori di Kota Banjarmasin Tahun 2024. Dinas Kebudayaan, Kepemudaan, Olahraga Dan Pariwisata. https://satudata.banjarmasinkota.go.id/data-statistik
Dinas Komunikasi, I. dan S. (2024). Buku Statistik Sektoral Kota Banjarmasin Tahun 2024. Dinas Komunikasi, Informatika Dan Statistik Kota Banjarmasin. https://www.scribd.com/document/883103542/Buku-Statistik-Sektoral-Kota-Banjarmasin-Tahun-2024-2025-01-08-14-44-20.
Dinas Koperasi Usaha Mikro Kecil di Kota Banjarmasin Tahun 2024. (2025). Jumlah Usaha Mikro Kecil di Kota Banjarmasin Tahun 2024. Https://Satudata.Banjarmasinkota.Go.Id.
Fama, E. F. (1970). American Finance Association Efficient Capital Markets: A Review of Theory and Empirical Work. In Source: The Journal of Finance (Vol. 25, Issue 2). https://doi.org/10.2307/2325486.
Hair, J. F., Hult, G. T. M. ., Ringle, C. M. ., & Sarstedt, Marko. (2017). A primer on partial least squares structural equation modeling (PLS-SEM). Sage Publications, Inc.
Kadin.id. (2025). UMKM Indonesia. Kadin.Id. https://kadin.id/data-dan-statistik/umkm-indonesia
Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision Under Risk. Econometrica, 47. https://doi.org/10.2307/1914185.
Karki, U., Bhatia, V., & Sharma, D. (2024). A Systematic Literature Review on Overconfidence and Related Biases Influencing Investment Deci-sion Making. In Economic and Business Review (Vol. 26, Issue 2, pp. 130–150). University of Ljubljana School of Economics and Business. https://doi.org/10.15458/2335-4216.1338.
Langer, E. J. (1975). The Illusion of Control. In Journal of Personality and Social Psychology (Vol. 32, Issue 2). https://doi.org/10.1037/0022-3514.32.2.311.
Nadhila, A., Sembel, R., & Malau, M. (2024). The Influence of Overconfidence and Risk Perception on Investment Decisions: The Moderating Ef-fect of Financial Literacy on Individual Millennial Generation Investors. Generation Investors. Journal Eduvest, 4(6), 5280–5299. http://eduvest.greenvest.co.id. https://doi.org/10.59188/eduvest.v4i6.1219.
Puspita, M. E., & Wardani, B. K. (2022). Mental Accounting and Business Decision-Making within SMEs: A Covid-19 Pandemic Phenomenon. Journal of Accounting and Strategic Finance, 5(1), 151–178. https://doi.org/10.33005/jasf.v5i1.228.
Ricciardi, V., & Simon, H. K. (2000). What is Behavioral Finance? In Business, Education and Technology Journal Fall.
Saputri Indah, & Setyaningsih. (2024). Pengaruh Literasi Keuangan, Overconfidence dan Sikap Keuangan Terhadap Perilaku Manajemen Keu-angan pada Pelaku UMKM Fashion di Kota Sragen. Jurnal Ekonomi Dan Manajemen, 2. https://doi.org/10.55606/jimas.v2i4.669.
Showcase, R., Moore, D. A., Healy, P. J., & And Healy, P. J. (2007). The Trouble with Overconfidence. http://repository.cmu.edu/tepper/341.
Simon, H. A. (1955). A Behavioral Model of Rational Choice. In Source: The Quarterly Journal of Economics (Vol. 69, Issue 1). https://about.jstor.org/terms. https://doi.org/10.2307/1884852.
Thaler, R. (1985). Mental Accounting and Consumer Choice. Institute of Operations Research and The Management Sciences, 4, 199–214. https://doi.org/10.1287/mksc.4.3.199.
Downloads
Published
Issue
Section
License
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal''s published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).