Local Cultural Values, Managerial Overconfidence and SME Performance: The Mediating Role of Debt Financing

This study examines the relationship between local cultural values, managerial overconfidence, small and medium enterprise (SME) performance, and the use of debt in funding decisions. The indicators of the constructs were measured using a 7-point semantic differential scale. Data were collected from 140 handicraft SME owners in Central Lombok and analysed using SEM PLS. The results of this study reveal that Tastura culture does not directly affect SME performance. The use of debt in funding decisions fully mediates the influence of the Tastura culture on SME performance, and funding decisions partially mediate the impact of managerial overconfidence on SME performance. These findings indicate that local cultural values are insufficient without funding decisions. The findings provide insights into the role of cultural values in influencing financing decisions that ultimately enhance firm performance. Furthermore, this study gives valuable information to the government to develop plans for SMEs in Central Lombok that are grounded in local culture.