Abstract
The present study examines the influences of mental budgeting on the financial management of SMEs, via a survey of SME owners’ practices regarding various issues in financial management. The sample...
Highlights
We are living in a world in which Small and Medium Enterprises (SMEs) are a fundamental part of an economy as they play a vital role in furthering growth, innovation and prosperity (Dalberg, 2011) and, contribute up to 33% of GDP in emerging economies (World Bank, 2015)
What are the characteristics of enterprises in the study areas? What are the major sources of income and expenditure of the owners of small and medium enterprise (SME)? What factors of Mental Budgeting (MB) influence the financial management (FM) of SMEs? What policy issues help the FM of SMEs?
The study examines the effects of MB on the FM of SME owners
Summary
We are living in a world in which Small and Medium Enterprises (SMEs) are a fundamental part of an economy as they play a vital role in furthering growth, innovation and prosperity (Dalberg, 2011) and, contribute up to 33% of GDP in emerging economies (World Bank, 2015). SME owners/managers make decisions ranging from acquiring funding to investments in the business. The reason is that, as human beings, most entrepreneurs are vulnerable to various biases that can lead them astray. Their mistakes may make them uncertain in optimal decision-making. SME performance may be driven by bad decisions concerning fund collection, allocation, savings, consumption, mortgages and even risk assessment and control. Insights from Behavioural Finance (BF) are required to make decisions more effective. BF examines financial phenomena through economic and cognitive psychology (Pompian, 2006)
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