BEHAVIORAL FINANCE AND ITS IMPACT ON POOR FINANCIAL PERFORMANCE OF SMES: A REVIEW

Decision making is a rational process. It will be irrational to claim that there would be no biases in rational decision-making process. Investment decisions are no exception to this. It is common that Behavioral elements in the investment decision are ignored either in stock market or in the working capital or capital budgeting decision by SMEs. This paper aims to study the different components of Behavioral finance that will impact the poor financial performance of Small and Medium size Enterprises (SMEs). The research is based on prevailing literature on behavioral finance and SMEs. The authors have made an attempt to use the available literature relevant to Behavioral finance, poor financial performance of SMEs and behavioral biases in investment decisions. After reviewing the various research papers, the authors have identified that behavioral components have a direct or indirect impact on the financial decision of SMEs which in turn affects the performance of SMEs.