Does financial literacy affect investor's planned behavior as a moderator?

Abstract

PurposeIn an emerging economy like India, the contribution of Indians in the stock market is very low, despite having the highest percentage of savings. The research tries to look for the variables which influence the investor's intentions to invest in the Indian stock market, by considering the theory of planned behavior (TPB). Moreover, the study incorporates financial literacy (FL) in the model to examine its influence on investors’ investment intention and also examine the moderation effect of financial literacy.Design/methodology/approachData were collected using a structured questionnaire from a sample of 393 respondents by using the convenience sampling method which is followed by the snowball sampling technique. For testing the research hypotheses, SEM and PROCESS macro v3.0 for SPSS were taken into consideration.FindingsThe results explain that factors of TPB i.e. attitude (AT), subjective norms (SNs) and perceived behavioral control (PBC) are significantly associated with investment intentions (IIs). Furthermore, along with the original components of the TPB model, Financial Literacy (FL) was also incorporated in the model, which predicted the investors' intention better. The results also stated that FL has a positive impact on AT, PBC and II. Moreover, results reveal that FL moderates the association between AT, PBC and II.Research limitations/implicationsThe study describes that financial literacy can help in increasing the participation of investors in the stock market. Therefore, in this situation, the current research permits the Security Exchange Board of India (SEBI), governments and financial institutions (FIs) to plan and design seminars or courses, programs, to enhance FL among individuals and promote individuals in making well-organized and efficient investment decisions in stock markets that will in turn upsurge individual investors participation. The study contributes to the existing literature of investment behavior by incorporating FL as a moderator. Research avoids considering actual investment behavior. The study also neglects demographic and socio-psychological factors which are the major factor that affects an investment decision. Furthermore, the research has only considered the objective dimension of FL.Originality/valueThe current research tries to incorporate FL in TPB model. Moreover, tries to examine the moderation effect of FL. The research is one of its kind as the past research neglect to examine the moderation effect of FL in relationship between AT, PBC and investment intension to investment in stock market. The research helps to understand how FL encourages investors to invest in the Indian stock market.

RETRACTED: An empirical assessment of financial literacy and behavioral biases on investment decision: Fresh evidence from small investor perception

“…Our study finding of financial literacy increases the accuracy in prediction for investment is supported by the existing literature ( Arianti, 2018 ; Alaaraj and Bakri, 2020 ; Raut, 2020 ; Dinantara et al, 2022 ). For example, the study of Adil et al (2022a) documented that A more informed understanding of personal finance may facilitate a rise in the proportion of individuals who choose to participate in the stock market. Investors often make decisions on the spur of the moment.…”

“…The study’s goal was to establish the extent to which different behavioral biases and financial literacy levels are associated with individual investors’ investment decisions. The study contributes to a better understanding of the many shapes that behavioral biases may take, as well as the potential impact of such biases on investment decisions ( Adil et al, 2022a ; Harjito, 2022 ). In a similar vein, research is conducted to determine how one’s level of financial literacy influences their choice of investments.…”

Investor’s Learning Style and Knowledge Acquisition Dimension: The Role of ICT in Maximising Knowledge Acquisition

“…Shortly, their cognition is always formed to dynamically focus and excel in acquiring material-latent, tacit-latent, and kinetic-active financial knowledge. This study aligns with the above-mentioned literature by Adil et al (2022), Chen et al (2020), Guenther et al (2018), Kim (2021), Henry and Peytcheva (2020) expose how sophisticated investors overcome all problems in various problem-solving ways. In other words, this study concludes that convergent-type investors reflect the effective learning cycle model, presenting the importance of conceptual and practical learning actualisation.…”

“…On the other hand, sophisticated investors are classified as convergent learning styles because of their great experience, accumulated knowledge, and expertise in actualising concepts and theories and changing them as a problem-solving mechanism. Moreover, these accumulations build them adaptively to analyse information containing problematic elements compared to basic and academic investment knowledge, standard or static information (Adil et al, 2022;Chen et al, 2020;Giampaoli et al, 2017). Therefore, this research makes it clear that investors internalise knowledge and actualise it as practical and technical tools to earn profits in the future, supported by ICT.…”

“…The second contribution, practically, is that this study reflects a basic concept of teaching related to the knowledge acquisition dimension that investment institutions and securities companies can embrace. In conclusion, involved institutions, such as securities and investment institutions, are responsible for developing investors' skills (Adil et al, 2022;Jain et al, 2022;Meoli et al, 2022). Thus, this study result can be applied to various teaching concept programs, for example, seminars, investment classes, etc.…”