Behavioral Financial Intervention towards Entrepreneurial Orientation and SMEs Performance

Abstract

The entrepreneurs are exposed to a number of cognitive biases that adversely or constructively affect the Small and Medium Enterprise (SME’s) performance. The empirical outcome in the field of Behavioral Finance biases (BF) and Entrepreneurial Orientation (EO) is mostly observed mixed. Therefore, the study objectives were a) to find out the effect of behavioral finance biases on SME’s performance and entrepreneurial orientation, and b) to measure the mediating effect of an entrepreneurial orientation in a relationship with behavioral finance biases and SME’s performance. The targeted population of this study was the entrepreneurs of three cadres i.e., service providers, manufacturers and traders, who were registered in the chambers of commerce and industries (CoCi’s) of Khyber Pakhtunkhwa, Abbottabad, and Dera Ismail (DI) Khan, Pakistan. The multivariate analysis, i.e. (factor analysis, validity assessment, and structural equation model) was used on the data. The findings portray that a) the behavioral finance biases have a positive influence on entrepreneurial orientation and SME’s performance, and b) the entrepreneurial orientation partially mediates in an association between behavioral finance biases and SME’s performance. The study concluded that the entrepreneurs ought to do the market research before jumping into a competitive market and must identify, recognize and control the behavioral finance biases instead of only following trends.

      Keywords: behavioral finance, entrepreneurial orientation, SME’s performance, factor analysis