Overconfidence Bias in Financial Decision-Making: Evidencefrom Culinary MSMEs in Banjarmasin, Indonesia

This study examines the role of overconfidence bias in shaping financial decision-making among culinary MSMEs in ‎Banjarmasin, Indonesia. Although overconfidence has been recognized as a behavioral bias influencing financial ‎decisions, empirical evidence in the context of MSMEs in developing countries is still limited. This study used a ‎quantitative approach, collecting data from 80 culinary MSMEs, which were then analyzed using Partial Least Squares–‎Structural Equation Modeling (PLS-SEM). Overconfidence was operationalized as a multidimensional construct ‎consisting of overestimation, overprecision, and illusion of control. The results showed that only the illusion of control ‎dimension had a positive and significant effect on financial decision-making, while overestimation and overprecision did ‎not show a significant effect. This finding indicates that MSMEs tend to rely on subjective perceptions of self-control ‎rather than measurable financial analysis in making financial decisions. This study contributes to the behavioral finance ‎literature by highlighting the heterogeneity of overconfidence dimensions in the micro-enterprise context and providing ‎practical implications for the development of behavior-based financial literacy programs for entrepreneurs in emerging ‎markets‎.