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Many authors have recognised that psychological factors influence the decision making of investors in the stock market. However, the SMEs sector always overlooked, but it plays an essential role in economic upsurge. The prime purpose of the current study is to investigate the influence of psychological factors such as confidence, optimism, loss aversion and herding behaviour could affect investment decisions in KP’s SMEs. The pilot study carried out initially. The study surveyed 249 samples through simple random technique through self-administrative questionnaires as previously no questionnaire available. The reliability of the questionnaire is 0.71 Cronbach’s Alpha Static and validity of the questionnaire is checked through Exploratory Factor Analysis (EFA). The study uses the descriptive statics, frequency and binary logistic regression used. The mean value of psychological factors is 3.81 shows a high impact on investment decisions, with 66% of investors has shown positive concern over psychological factors and considering it motivational factor for investment decisions. The result binary logistic model revealed that all sub-factors of psychological are positively significant with investment decision except the loss aversion. The probability of investing in the presence of confidence (79.59%), optimism (89.90%), loss aversion (64.29%), herd behaviour (88.37%) and overall psychological factors (80.54%) in KP’s SMEs. Hence it can be concluded that investors are rational and their investment decisions in SME’s at times influence by psychological factors.

MIAN MUHAMMAD WASEEM IQBAL, Prof. Dr. S. GHIASUL HAQ, LAL MUHAMMAD. (2020) Psychological Factors Affecting the Investment Decisions in the Promotion of Small and Medium Enterprises (SMEs) In Khyber Pakhtunkhwa, International Review of Management and Business Research, Volume 9, Issue 2.
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