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

• Main Authors: Nungki Pradita, Theresia Woro Damayanti, Supramono Supramono
• Format: Article
• Language: English
• Published: Editura ASE Bucuresti 2018-09-01
• Series: Romanian Economic Journal
• Subjects: herding; intention to apply for credit; decision to apply for credit
• Online Access: http://www.rejournal.eu/sites/rejournal.versatech.ro/files/articole/2018-10-10/3529/4nungkipradita.pdf

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.