ISSN: 2222-6990
Open access
We examine Loss aversion bias in working capital management and performance of Small and medium-sized enterprises (SMEs) in Accra, Ghana. Our study adopts a qualitative case study approach and in-depth interviews to obtain data from thirty-five (35) Owner-managers. This research shows that SME managers(owners) are loss aversion as they evaluate financial outcomes by thinking about loss and profits and use profits in most financial decision thereby prone to fear of loss. Moreover, SMEs managers (owners) subjected to enormous fear tend to be highly loss averse over loss (uncertain gain) and risk averse. While managers(owners) with less fear are low loss averse over profits and risking seeking. By implication, low loss averse SME managers(owners) tend to perform better than highly loss averse managers who underinvest in working capital in inventory, resulting in decreased profit margins. Thus, we conclude SMEs manager’s loss aversion matters in working capital management and performance.
Agyei-Mensah, B. (2012). Working Capital Management Practices of Small Firms in the Ashanti Region of Ghana. International Journal of Academic Research in Business and Social Sciences. 02(1),567-583.
Alesina, A., & Passarelli, F. (2019). "Loss Aversion in Politics," American Journal of Political Science, 63(4), 936-947.
Bandara, R. M. S., & Rathnasiri, U. A. H. A. (2016). The Working Capital Management Practices of Small and Medium Enterprises (SMEs) in Sri Lanka, ICME 2016, Faculty of Management and Finance, University of Ruhuna.
Baños?Caballero, S., García?Teruel, P. J., & Martínez?Solano, P. (2010). Working capital Management in SMEs. Accounting & Finance, 50(3), 511-527.
Barberis, N., Huang, M., and Santos, T. (2001), “Prospect Theory and Asset Prices”, Quarterly Journal of Economics, 116 (1), 1-53.
Benartzi, S., & Thaler, R. H. (1995). Myopic Loss Aversion and the Equity Premium Puzzle. The Quarterly journal of Economics, 110(1), 73-92.
Bisin, A., Lizzeri, A., & Yariv, L. (2015). Government Policy with Time Inconsistent Voters. American Economic Review, 105(6), 1711-37.
Birkinshaw, J., Brannen, M. Y., & Tung, R. L. (2011). From a Distance and Generalizable to up close and Grounded: Reclaiming a Place for Qualitative Methods in International Business Research. Journal of International Business Studies, 42(5),573–581.
Blinder, A. S., & Maccini, L. J. (1991). Taking Stock: A Critical Assessment of Recent Research on Inventories. Journal of Economic perspectives, 5(1), 73-96.
Bodnaruk, A., & Simonov, A. (2016). Loss-averse Preferences, Performance, and Career Success of Institutional Investors. The Review of Financial Studies, 29(11), 3140-3176.
Bouteska, A., & Regaieg, B. (2018). Loss Aversion, Overconfidence of Investors and their impact on Market Performance Evidence from the US Stock Markets. Journal of Economics, Finance and Administrative Science.
Burke, L. A., & Miller, M. K. (2001). Phone Interviewing as a Means of Data Collection: Lessons learned and practical Recommendations. In Forum Qualitative Sozialforschung/Forum: Qualitative Social Research, 2(2), Art. 7.
Cachia, M., & Millward, L. (2011). The Telephone Medium and Semi-Structured Interviews: A Complementary fit. Qualitative Research in Organizations and Management: An International Journal. 6(3) 265-277.
Cherono, I., Olweny, T., & Nasieku, T. (2019). Investor Behavior Biases and Stock Market Reaction in Kenya. Journal of Applied Finance & Banking, 9(1), 147–180
Creswell, J. W., & David, J. C. (2018). Research Design: Qualitative, Quantitative, and Mixed Methods Approaches. 4th edition. Los Angeles: SAGE. Publication
Deakin, H., & Wakefield, K. (2014). Skype Interviewing: Reflections of two PhD Researchers. Qualitative Research, 14(5), 603-616.
Deloof, M., (2003). Does Working Capital Management Affect Profitability of Belgian Firms? Journal of Business, Finance and Accounting 30, 573–587.
Domegan, C., & Fleming, D. (2007). Marketing research in Ireland: Theory and practice. Gill & Macmillan.
Donkor, J. (2015). Working Capital Management of SMEs: Ghana’s version of the story. Journal of Economics, Management and Trade, 1-12.
Dyer, Jr. W. G., & Wilkins, A. L. (1991). Better Stories, not Better Constructs, to Generate Better Theory: A Rejoinder to Eisenhardt. Academy of Management Review, 16(3), 613-619.
Etikan, I., Musa, S. A., & Alkassim, R. S. (2016). Comparison of Convenience Sampling and purposive sampling. American Journal of Theoretical and Applied Statistics, 5(1), 1-4.
Fenig, S., Levav, I., Kohn, R., & Yelin, N. (1993). Telephone vs face-To-face Interviewing in a community psychiatric Survey. American Journal of Public Health, 83(6), 896-898.
Filbeck, G., & Lee, S. (2000). Financial Management Techniques in Family Businesses. Family Business Review, 13(3), 201-216.
Fontana, F., & Frey, J. (2000). The Interview: From Structured Questions to Negotiated text. In N. K. Denzin & Y. S. Lincoln (Eds.), Handbook of Qualitative Rese
In-Text Citation: (Lamptey & Marsidi, 2020)
To Cite this Article: Lamptey, J., & Marsidi, A. Bin. (2020). Loss aversion Bias in Working Capital Management and Performance Small and Medium- sized Enterprise(SMEs): Perspectives of Ghanaian SME Managers. International Journal of Academic Research in Business and Social Sciences, 10(5), 127–142.
Copyright: © 2020 The Author(s)
Published by Human Resource Management Academic Research Society (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode