MODELLING THE IMPACT OF HEURISTIC BIASES ON INVESTMENT DECISION-MAKING AND ENTERPRISE PERFORMANCE: EVIDENCE FROM SMALL AND MEDIUM ENTERPRISES IN NIGERIA

Mohammed Mahmuda Khalifa
Volume 14 Issue 1

Abstract

The purpose of this study is to examine the effect of heuristic biases and investment decision-making on the enterprise performance of small and medium enterprises in Nigeria. The study adopted a survey research design, and the population comprised registered SME owners and managers across Nigeria. Using the Yamane sample size determination formula, an initial sample size of about 400 respondents was obtained, and an additional 30 percent was added to account for possible non-response, bringing the final sample size to 520 respondents. A structured questionnaire was used to collect data, and Partial Least Squares Structural Equation Modelling (PLS-SEM) was employed for data analysis using SmartPLS. The study found that availability bias has a positive and significant effect on enterprise performance. However, representativeness bias, overconfidence bias, and anchoring bias were found to have positive but insignificant direct effects on enterprise performance. The results further showed that all the heuristic biases examined have positive and significant effects on investment decision-making. In addition, investment decision-making was found to have a positive and significant effect on enterprise performance and to significantly mediate the relationship between heuristic biases and enterprise performance. The study highlights the importance of understanding how behavioural factors influence business decisions. It emphasises the need for targeted training and advisory programmes to help SME owners recognise cognitive biases and improve investment decision-making. Strengthening decision-making practices can help SMEs reduce poor judgement and achieve improved and sustainable enterprise performance across Nigeria. Keywords: Heuristic Biases, Representativeness Bias, Overconfidence Bias, Anchoring Bias, Availability Bias, Investment Decision-Making, Enterprise Performance, SMEs, Nigeria.

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