Interdependence of Influence between Risk Management Behavior, MSME Characteristics, and Overconfidence on Business Sustainability (A case study in Indonesia)

Abstract

More than 50% of Micro, Small, and Medium Enterprises (MSMEs) in Indonesia run their business for reasons of livelihood, while 30% do this since MSMEs are profitable, and may support their living costs. This study aims to determine and analyze the influence of risk management behavior, characteristics of MSMEs through overconfidence on MSME business sustainability, and consequently MSMEs as a source of livelihood. The result of this study indicates that risk management behavior has a significant positive effect on overconfidence, while the characteristics of MSMEs have a significant negative effect on that. In turn, it’s shown that overconfidence had a positive and significant effect on the sustainability of MSMEs. However, the characteristics of MSMEs and risk management behavior had no significant positive effect on the sustainability of MSMEs. These results indicate also that MSME entrepreneurs’ overconfidence plays a major role in managing their business, which could be considered by the local government and/or the central government in determining MSME policies, such as placements to sell which are given and regulated by each local government considering the accessibility of sellers and buyers as well as their safety.

Behavioral Financial Aspects Analysis on MSMEs Business Development of Culinary Sector in Semarang City

“…Here the difference was related to the point of view of MSME participants, namely compliance with government recommendations regarding the use of information technology and increasing the size of the business. For MSMEs that were not ready to use online transaction information technology and the business size was still small, they thought they did not need to be developed at present until they are ready and their sales increase in line with MSME expectations (Tyoso, Jaluanto et al, 2021).…”