Behavioral economics is a relatively young branch of economics that has challenged traditional economic models by providing a more realistic explanation through the integration of psychological factors. It emphasizes the importance of studying human behavior in economic situations and lays the foundation for a better understanding of the complex interactions between the economy and the human mind. This leads to the topic of behavioral finance, which explores how human psychology influences financial decisions made by individuals, institutions, and markets. Herd behavior is one of the phenomena studied in behavioral finance. It is defined as an individual's decision, whether conscious or unconscious, to ignore the information they possess to follow the behavior of others. The subject of this thesis is the analysis of the occurrence of the herd behavior effect in making financial decisions in selected companies in the Republic of Croatia. The aim of the paper is to investigate whether there is a herd behavior effect in shaping the capital structure of Croatian companies. Data collected from financial statements will be processed using regression analysis to examine whether there are indications of herd behavior in shaping capital structure, i.e., whether companies adjust their leverage level to the average leverage level of the entire sample and/or the level maintained by the leader among the observed companies. The analysis was conducted on a selected sample of Croatian companies for the period from 2000 to 2023. The data was processed using Microsoft Excel. The paper consists of 5 chapters. Following the introductory part, two theoretical chapters explain the overall theoretical framework and the importance of behavioral economics. These studies provide insights into the methodologies used to measure herd effect and their results and conclusions. The fourth chapter is the empirical part of the paper, where the analysis of the presence of herd behavior effect among non-financial companies in the Republic of Croatia from 2000 to 2023 will be conducted. The regression results show that the effect of herd behavior is somewhat present among companies in Croatia. This means that companies tend to follow the behavior of the median or the leader, reducing the dispersion of capital structure (CSAD).