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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
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    References listed on IDEAS

    as
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    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

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