Abstract:
This paper aims to explore the role of financial literacy, risk preference, and home bias
in Minangkabau ethnic MSE funding decisions, whether to follow the pecking order
theory pattern. Hypothesis testing uses the SEM-PLS alternative method. Data
collection was carried out through online and offline survey techniques with a sample
of 623 Minangkabau ethnic MSEs. The results reveal that financial literacy, home bias
does not have a direct effect on funding decisions. Financial literacy does not directly
influence risk preference. Financial literacy affects funding decisions when mediated by
the variables of home bias and risk preference. These results reveal that there is a role
for financial literacy, risk preference, and home bias in funding decisions. Minangkabau
ethnic MSEs in meeting funding needs do not follow the pecking order theory pattern.
The results of this study prove that financial literacy is still very low for MSEs, input for
financial institutions related to MSEs funding to provide easy-to-understand training.
This study seeks to explore the role of financial literacy, risk preference, and home bias
in Minangkabau ethnic MSEs funding decisions. The data show that the average level
of financial literacy is low with a high home bias leading to bias in assessing risk. Home
bias increases resulting in a misperception of risk, so that there is an error in judgment
in taking more risks than they can bear. Consequently, funding decisions use external
funding which has a higher risk.
