Financial literacy, self-efficacy and risky credit behavior among college students: Evidence from online consumer credit

Abstract

The issue of online consumer credit for college students has attracted academic attention, but the interaction mechanism between financial literacy and risky credit behavior is not fully understood. Based on the theory of financial literacy and self-efficacy, this study investigates the underlying mediating mechanisms and contextual conditions in the relationship between college students’ financial literacy and risky credit behavior, using data from 539 college students in the Pearl River Delta of China. The results indicate that the financial literacy of these students has a significantly negative impact on their risky credit behavior, and that subjective financial literacy has a greater effect than objective financial literacy. We also find that the relationship between financial literacy and risky credit behavior is intensified when college students’ levels of finance-related stress are high. Our work demonstrates that financial self-efficacy partially mediates the relationship between financial literacy and risky credit behavior. This study contributes to financial literacy literature by identifying the interplay of financial self-efficacy, individual financial literacy, and consumer credit behavior.