Availability Bias and Investment Decisions of Selected Small and Medium Enterprises in Nairobi County

Abstract

Behavioral biases, especially availability bias, are recognized for their influence on decision-making. As a result, its effect on small and medium enterprises should be quantified given its influence. This study aimed at assessing the influence of availability bias on the investment decisions of selected small and medium-sized businesses in Nairobi County, Kenya. The study was grounded on Heuristics Theory and Behavioral Portfolio Theory. Based on positivist philosophy, employed a cross-sectional and survey research design. A sample of 426 was drawn from 18,872 small and medium enterprises registered with the Micro and Small Enterprises Authority using a proportionate stratified random sampling technique. From the trade and service enterprises, selected managers or proprietors were targeted as respondents. Descriptive statics and inferential statistics were used to analyze data collected from 372 respondents. Pearson correlation analysis results indicted a strong positive relationship between availability bias and investment decisions, evidenced by a coefficient r = 0.964 and a p-value of 0.000 < 0.05 indicating a strong positive correlation which was statistically significant. Regression analysis results on the influence of availability bias on investment decisions indicated a statistically significant positive effect (β = 0.158, p = 0.798) which accounted for 92.9% of the variation in those decisions. It was concluded that availability bias was eminent among the respondents and its direct influence on investment decisions was significant, although other behavioral biases or contextual elements may have a more significant influence. From the results, it is recommended that small and medium enterprises implement organized decision-making frameworks and offer training to reduce dependence on readily accessible information.