Malaysian Individual Investors: What Are the Factors That Influence Their Financial Statement Usage?

Abstract

Research aim: This study seeks to examine the knowledge and attitudinal factors that influence financial statement usage among Malaysian individual investors. Design/ Methodology/Approach: A survey was conducted on a sample of 399 Malaysian individual investors using self-administered questionnaires. Research finding: The findings reveal that financial statement usage is positively associated with subjective norm, financial statement knowledge, attitude towards financial statement usage, and perceived behavioural control. However, it is negatively associated with trading frequency attitude. Theoretical contribution/Originality: This study seeks to contribute to the very limited research on the factors that influence individual investors' financial statement usage. Additionally, it enriches the literature on financial statement usage among individual investors in Malaysia by showing the extent to which the three main financial statements are utilised by them. Furthermore, this research extends financial literacy research on stock investing to the realm of financial statement usage by highlighting the influence of financial statement knowledge on this behaviour. Thus, the study seeks to bridge the gap between financial reporting and financial literacy. Practitioner/Policy implication: The findings provide useful insights for the providers of investor education programmes in developing more holistic programmes. Research limitation/Implication: Non-random sampling was employed in this study, albeit such an approach is consistent with the literature. Also, respondents comprised individual investors who are proficient in English because the researchers seek to complement Malaysian studies on the readability of English language financial statement narratives.

Role of financial and non-financial information in determining individual investor investment decision: a signaling perspective

“…The literature on utility theory focused on both micro and macro models that explain aggregate market behavior (Guay et al, 2016). Conventional theories of finance presume that information is symmetric, and parties involved in economic transactions are rational (Kishan and Alfan, 2019). However, studies expounded in the past literature reveal that standard finance assumptions of an efficient market hypothesis rarely hold and result in market imperfections .…”

“…According to PSX statistics, there is a total of 0.25 m individual investors actively participating in stock trading. For the most part, the literature on the institutional investment decision-making process has been welldocumented (Kishan and Alfan, 2019).…”

“…Therefore, financial information has lost its credibility and relevance to Individual investor investment decision investors. In such a scenario, nonfinancial information may be a window to shed light on corporate performance to make effective investment decisions (Kishan and Alfan, 2019). In response to such developments, regulators have called for a reexamination of the value of nonfinancial information, information that is not related to company finances, but embedded material evidence to support investor decision-making (Yousaf et al, 2019b;Chong et al, 2017).…”

“…If it is perceived by the investor that the reputation of a firm reflects its performance, it will mainly affect its investor choices to invest in a particular firm (Kromidha and Li, 2019). Accordingly, a robust corporate reputation affects the investor's reaction to entering into economic contracts (Kishan and Alfan, 2019). Economic contracts are earned on reputation and thereby provided sustained incentives for managers to maintain and invest in their reputations (Sampath et al, 2018).…”

Financial risk attitudes, demographic profiles, and behavioural traits: Do they interrelate?

“…In a different study, Otuteye and Siddiquee (2019) argue that active investors tend to have lower performance than passive investors mainly due to cognitive and emotional factors. Kishan and Alfan (2019) on the other hand, find that the usage of financial statement for investment decision-making is higher among investors with higher degree of confidence.…”