IDEAS home Printed from https://ideas.repec.org/a/rej/journl/v21y2018i69p40-52.html
   My bibliography  Save this article

The Decision to Apply for Bank Credits: A Preliminary Investigation of MSME Herding Behavior from Indonesia

Author

Listed:
  • Nungki Pradita
  • Theresia Woro Damayanti
  • Supramono Supramono

Abstract

It is likely that micro, small, and medium enterprises (MSMEs) owners apply for credit not because of their intention but because they follow other MSME owners’ behavior. The behavior to follow the general tendency is commonly known as herding. This study aims to analyze the effect of herding, both group herding and reputational herding in credit decision of MSME owners. We generate our data by surveying 150 MSME owners in the City of Salatiga. The results show that herding does not directly affect the decision to apply for credit. However, herding indirectly affects the decision to apply for credit through the intention to apply for credit.

Suggested Citation

  • Nungki Pradita & Theresia Woro Damayanti & Supramono Supramono, 2018. "The Decision to Apply for Bank Credits: A Preliminary Investigation of MSME Herding Behavior from Indonesia," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 21(69), pages 40-52, September.
    • Handle: RePEc:rej:journl:v:21:y:2018:i:69:p:40-52
    as

    Download full text from publisher

    File URL: http://www.rejournal.eu/sites/rejournal.versatech.ro/files/articole/2018-10-10/3529/4nungkipradita.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Welch, Ivo, 1992. "Sequential Sales, Learning, and Cascades," Journal of Finance, American Finance Association, vol. 47(2), pages 695-732, June.
    2. Boyson, Nicole M., 2010. "Implicit incentives and reputational herding by hedge fund managers," Journal of Empirical Finance, Elsevier, vol. 17(3), pages 283-299, June.
    3. Rajesh K. Singh & Suresh K. Garg & S.G. Deshmukh, 2010. "The competitiveness of SMEs in a globalized economy," Management Research Review, Emerald Group Publishing Limited, vol. 33(1), pages 54-65, January.
    4. Valaei, Naser & Rezaei, Sajad & Ismail, Wan Khairuzzaman Wan, 2017. "Examining learning strategies, creativity, and innovation at SMEs using fuzzy set Qualitative Comparative Analysis and PLS path modeling," Journal of Business Research, Elsevier, vol. 70(C), pages 224-233.
    5. , & ,, 2006. "Financial equilibrium with career concerns," Theoretical Economics, Econometric Society, vol. 1(1), pages 67-93, March.
    6. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 797-817.
    7. Thorsten Beck & Asli Demirgüç-Kunt & María Pería, 2011. "Bank Financing for SMEs: Evidence Across Countries and Bank Ownership Types," Journal of Financial Services Research, Springer;Western Finance Association, vol. 39(1), pages 35-54, April.
    8. John Hulland, 1999. "Use of partial least squares (PLS) in strategic management research: a review of four recent studies," Strategic Management Journal, Wiley Blackwell, vol. 20(2), pages 195-204, February.
    9. Malhotra, Naresh K., 2005. "Attitude and affect: new frontiers of research in the 21st century," Journal of Business Research, Elsevier, vol. 58(4), pages 477-482, April.
    10. John R. Graham, 1999. "Herding among Investment Newsletters: Theory and Evidence," Journal of Finance, American Finance Association, vol. 54(1), pages 237-268, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Puput Tri Komalasari & Marwan Asri & Bernardinus M. Purwanto & Bowo Setiyono, 2022. "Herding behaviour in the capital market: What do we know and what is next?," Management Review Quarterly, Springer, vol. 72(3), pages 745-787, September.
    2. Bizer, Kilian & Meub, Lukas & Proeger, Till & Spiwoks, Markus, 2014. "Strategic coordination in forecasting: An experimental study," University of Göttingen Working Papers in Economics 195, University of Goettingen, Department of Economics.
    3. Mathias Drehmann & Jörg Oechssler & Andreas Roider, 2005. "Herding and Contrarian Behavior in Financial Markets: An Internet Experiment," American Economic Review, American Economic Association, vol. 95(5), pages 1403-1426, December.
    4. Michael McAleer & Kim Radalj, 2013. "Herding, Information Cascades and Volatility Spillovers in Futures Markets," Journal of Reviews on Global Economics, Lifescience Global, vol. 2, pages 307-329.
    5. Cai, Fang & Han, Song & Li, Dan & Li, Yi, 2019. "Institutional herding and its price impact: Evidence from the corporate bond market," Journal of Financial Economics, Elsevier, vol. 131(1), pages 139-167.
    6. Wang, Xinru & Kim, Maria H. & Suardi, Sandy, 2022. "Herding and China's market-wide circuit breaker," Journal of Banking & Finance, Elsevier, vol. 141(C).
    7. Galariotis, Emilios C. & Rong, Wu & Spyrou, Spyros I., 2015. "Herding on fundamental information: A comparative study," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 589-598.
    8. Cesare Fracassi, 2017. "Corporate Finance Policies and Social Networks," Management Science, INFORMS, vol. 63(8), pages 2420-2438, August.
    9. Wen-Lin Wu & Yin-Feng Gau, 2017. "Home bias in portfolio choices: social learning among partially informed agents," Review of Quantitative Finance and Accounting, Springer, vol. 48(2), pages 527-556, February.
    10. Andreas Roider & Andrea Voskort, 2016. "Reputational Herding in Financial Markets: A Laboratory Experiment," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 17(3), pages 244-266, July.
    11. Camara, Omar, 2017. "Industry herd behaviour in financing decision making," Journal of Economics and Business, Elsevier, vol. 94(C), pages 32-42.
    12. Pop, Raluca Elena, 2012. "Herd behavior towards the market index: evidence from Romanian stock exchange," MPRA Paper 51595, University Library of Munich, Germany.
    13. Caglayan, Mustafa & Talavera, Oleksandr & Zhang, Wei, 2021. "Herding behaviour in P2P lending markets," Journal of Empirical Finance, Elsevier, vol. 63(C), pages 27-41.
    14. Sylvain Marsat, 2006. "Does The Consensus Prevail? Experimental Evidence," Working Papers hal-02156562, HAL.
    15. Melissa Newham & Rune Midjord, 2018. "Herd Behavior in FDA Committees: A Structural Approach," Discussion Papers of DIW Berlin 1744, DIW Berlin, German Institute for Economic Research.
    16. Hirshleifer, David & Teoh, Siew Hong, 2008. "Thought and Behavior Contagion in Capital Markets," MPRA Paper 9164, University Library of Munich, Germany.
    17. Marius Popescu & Zhaojin Xu, 2018. "Mutual fund herding and reputational concerns," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 42(3), pages 550-565, July.
    18. Michiel Bijlsma & Wim Suyker, 2008. "The credit crisis and the Dutch economy... in eight frequently asked questions," CPB Memorandum 210.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    19. Gregory DeCoster & William Strange, 2012. "Developers, Herding, and Overbuilding," The Journal of Real Estate Finance and Economics, Springer, vol. 44(1), pages 7-35, January.
    20. Michiel Bijlsma & Jeroen Klomp & Sijmen Duineveld, 2010. "Systemic risk in the financial sector; a review and synthesis," CPB Document 210.rdf, CPB Netherlands Bureau for Economic Policy Analysis.

    More about this item

    Keywords

    herding; intention to apply for credit; decision to apply for credit;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rej:journl:v:21:y:2018:i:69:p:40-52. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Radu Lupu (email available below). General contact details of provider: https://edirc.repec.org/data/frasero.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.