Social Capital and Stock Market Participation via Technologies: The Role of Households’ Risk Attitude and Cognitive Ability

Abstract

This article reviews the relation between social capital and stock market participation via new technology. Its purpose is to acquire a thorough understanding of the structural, relational, and cognitive aspects of social capital's influences and to recommend further empirical research ideas to the existing body of knowledge on household finance. It discusses the consideration of modern and highly technological platforms such as the internet stock market exchange platforms and applications. The stock market participation puzzle remains unsolved despite the progress in explaining the economic rationality behind investors decision making through behavioral finance. Furthermore, the researchers develop four propositions which can expound the existing relationship between social capital dimensions such as the structural, relational, and cognitive aspects and stock market participation of households. Doing so, we discuss the roles of risk attitude and the influence of cognitive ability such as financial awareness, financial literacy, and IQ (intelligence quotient) to enhance the existing body of knowledge. Practically, this article adds valuable ideas in solving the issue of limited participation not just in the stock market but in other financial markets through reflecting on the sociological and (green) technological concepts. Lastly, the implications for sustainable financial markets are elaborated.

How Investors Attitudes Shape Stock Market Participation in the Presence of Financial Self-Efficacy

“…Further, risk attitudes have partially mediated the relationship between money attitudes and stock market participation as supported by Cheng et al (2018) and Saurabh and Nandan (2018). These results support the previous studies findings (Wood and Zaichkowsky, 2004) and indicate that the investors who are risk-seekers increasingly participate in the stock market as supported by Cheng et al (2018) and Akhtar and Das (2019). It indicates that the investors who are risk-seekers tend to invest in stocks rather than bonds and those investors who play it safe increasingly invest in bonds as compared to stocks as supported by Keller and Siegrist (2006b).…”

“…It has also been investigated that less risk aversion predicts participation in various models (Haliassos and Bertaut, 1995). Further, risk attitudes mediate the relationship between social capital and stock market participation (Cheng et al, 2018). Saurabh and Nandan (2018) have confirmed the mediating role of risk attitudes toward financial satisfaction.…”

“…Therefore, financial self-efficacy, a significant psychological construct, can play a significant role in shaping an individual's decision-making style during different phases of life especially in personal finance behaviors as supported by Farrell et al (2016) and Asebedo and Payne (2018). Further, risk attitudes have partially mediated the relationship between money attitudes and stock market participation as supported by Cheng et al (2018) and Saurabh and Nandan (2018). These results support the previous studies findings (Wood and Zaichkowsky, 2004) and indicate that the investors who are risk-seekers increasingly participate in the stock market as supported by Cheng et al (2018) and Akhtar and Das (2019).…”

“…Generally, willingness to taking risks leads to risky behaviors (Gürdal et al, 2017). Nosić and Weber (2010) concluded that a subjective risk attitude impacts investment in shares positively as supported by Cheng et al (2018). Conversely, Sutter et al (2013) found that risk attitudes weakly predict field behavior (Brown et al, 2008;Gürdal et al, 2017).…”

The Role of Mutual Guarantee Institutions in the Financial Sustainability of New Family-Owned Small Businesses

“…Sustainable finance is strongly linked to financial sustainability, which is related to structural, relational and cognitive aspects that create value for a company [4] and the long-time survival capacity of companies. The link between business sustainability and the financial performance of a firm has been demonstrated by several studies, as reference [5] showed.…”