Volume-1 | Issue-2 | November-2018 | ISSN - 2617-4464 (Print) | ISSN - 2617-7269 (Online) | East African Scholars Journal of Economics, Business and Management (An Open Access, International, Indexed, Peer-Reviewed Journal) A Publication of East African Scholars Publisher, Kenya www.easpublisher.com Copyright @ 2018: This is an open-access article distributed under the terms of the Creative Commons Attribution license which permits unrestricted use, distribution, and reproduction in any medium for non commercial use (NonCommercial, or CC-BY-NC) provided the original author and source are credited. Publisher: East African Scholars Publisher, Kenya 34 Original Research Article Influence of Herding Behavior on Investment Decision of SMEs in Bomet County, Kenya Chelangat Naomi 1 ; Symon Kiprop 2 ; John Tanui 3 1,3 School of Business and Economics, Kabarak University, Kenya 2 School of Business and Economics, Egerton University, Kenya *Corresponding Author Chelangat Naomi Email: ncnaomie@gmail.com Article History Received: 13.10.2018 | Accepted: 23.10.2018 | Published: 30.11.2018 Abstract: Small and Medium Enterprises (SMEs) play an essential role in economic development as part of entrepreneurship. They provide goods and services, enhance competition, foster innovation and generate employment. The objective of the study was to determine the influence of herding behavior on investment decision in SMEs in Bomet County. The study targeted 4196 SMEs registered in Bomet County of which 108 were selected using stratified random sampling. Reliability of the research instrument was calculated using Cronbach‟s coefficient alpha. Primary data was used to obtain the required information by the use of questionnaires. Data obtained was analyzed using descriptive statistics and inferential statistics with aid of Statistical Package for Social Science (SPSS) software version 21 and presentation through tables and summary made in percentages and proportions. The correlation coefficient analysis revealed herding behavior had a positive correlation relationship on the dependent variable. The findings from the multiple linear regression analysis showed that herding behavior had a negative beta of 0.146 this showed it has a negative impact on investment decision hence not significant. The study hence concluded that herding behavior is not an important factor in influencing investment decisions of SMEs in Bomet County. The study recommended that investors not to imitate others but to trust themselves in making their own personal decisions and also the government to implement more policies which boosts the growth of SMEs and further research to be done other factors influencing investment decisions. Keywords: Herding behavior, investment decision, SMEs INTRODUCTION Accumulations of unproductive counters by market participant against expert analysis, skewed market return are some of the indications of herded counters (Ombai, 2010). Explanations as to why investors herd may include: the fact that market participants may gather information from the actions of previous participants, investors may react to the arrival of fundamental information in a similar manner, investors may simply be irrational and herd behavior can arise because of psychological and social conventions (Spyrou, 2013).Herd behavior occurs mostly during periods of extreme market movements as investors would be more triggered to follow the market consensus( Chen et al,2010). According to Abdulahi (2014), investment decisions and returns often depend a lot on the investors‟ perceptions routines and cognitive or emotional biases unique to individual. A few of the investment, however, will be gainful and the investors will not always make the right investment decisions over period of years (Muthama, Mbaluka & Kalunda 2013) . The investment decision-maker goes through a decision making process consisting of problem recognition, information search, evaluation of alternative purchase decision and post purchase behaviors (Wamae, 2013). Small and Medium enterprises (SMEs) contributes huge to the economy of any country that is contribution to Gross Domestic Product (GDP) and creation of job opportunities to citizens (European Commission, 2015). They promote innovation and are able to boost growth in the economy through job creation which in turn leads to the expansion of the taxable income (Ngui, 2014). They cut across all sectors of the Kenyan economy and the government recognizes this as one of the strongest pillar‟s to its economic growth (Government of Kenya, 2007).The government has promoted a favorable operating environment for SMEs in both developing