Households' intentions under financial vulnerability conditions: is it likely for the COVID-19 pandemic to leave a permanent scar?

Abstract

PurposeThe authors draw on psychological reactance theory, collective mental programming, psychological profiles and financial vulnerability experiences to assess the possibility that the pandemic may induce transformative changes in households' behavioral intentions related to financial decisions after the pandemic is over.Design/methodology/approachUsing a unique survey data drawn from four different countries located in North America, Europe, Africa and Latin America, the authors show that the stressful conditions that accompanied the pandemic have instigated a state of financial vulnerability and stimulated instinctual defensive mechanisms among consumers.FindingsThe study results indicate that households have intentions to make defensive decisions in spending, consumption, planning and investment. Furthermore, the authors report evidence that personal psychological heterogeneity (as an individual factor) and collective mental programming (as a cultural factor) play a significant role in shaping households' postpandemic financial intentions.Research limitations/implicationsThe study findings carry important practical implications. For financial institutions, marketers and financial advisors, the authors’ work implies that individual and collective factors affect people's perception and behavioral intentions in response to financial adversities. For social planners and legislators, the authors’ work shows that they should expect not only short-term but also long-term reactions to the COVID-19 pandemic.Originality/valueMost research on the impact of COVID-19 pandemic on households' financial behavior focuses on transitional adjustments made during the pandemic, and little emphasis has been placed on potential postpandemic adjustments. The authors contend that it would be a mistake to analyze the pandemic-induced crisis as a temporary financial hardship.

The COVID-19 pandemic and perceived risks of immigrants in the United States

“…Clark et al (2021) found that approximately 20% of respondents were financially fragile and had difficulty raising mid-sized emergency funds during the pandemic. Alhenawi and Yazdanparast (2022) asserted that the pandemic left a permanent scar on households, and made them more prone to defensive financial decisions. Based on these discussions, we developed the first hypothesis of the study.…”

Impact ofCOVID‐19 pandemic on household financial decisions: A consumer vulnerability perspective

“…As such, researchers have called for the examination of household responses across different economies to explore potential differences between developed and emerging economies (Liu et al, 2020 ). Moreover, extant research has merely examined consumption patterns during the pandemic with little attention to the post‐pandemic changes in consumer behavior (see Alhenawi & Yazdanparast, 2021 for an exception). Furthermore, many studies have largely focused on purchase‐related decisions and ignored other decisions related to interpersonal relationships, individuals' emotional well‐being, and financial situation.…”

COVID-19 vaccination and household savings: An economic recovery channel

“…Literature suggests that households would heighten their precautionary saving motives and then increase their savings in response to economic recessions and hazardous events because of the aggravation of uncertainties about the future and the worsening of the macroeconomy (e.g., Skidmore, 2001 ; Mody et al, 2012 ; Lydon and McIndoe-Calder, 2021 ; Zhang et al, 2022 ). In addition, from a psychological/behavioral perspective, Alhenawi and Yazdanparast (2021) and Yazdanparast and Alhenawi (2022) find that the COVID-19 pandemic is associated with households’ increases in fears and uncertainties. As COVID-19 vaccination may mitigate households’ uncertainties and boost the macroeconomy, we conjecture that COVID-19 vaccination leads to significant decreases in precautionary saving motives and consequently, in households’ bank savings.…”