Abstract
Research background: Globalization, digitalization and growth of technological innovations trigger development of new financial services, such as real estate crowdfunding. Seeking better return opportunities individual investors often disregard neoclassical decision-making criteria, while behavioral factors, such as social influence, emotions, cognitive abilities are gaining importance. This paper addresses the role of family economics socialization as a complex process by which individuals acquire social skills, knowledge, behavior patterns needed to make investment decision by purposively or spontaneously interacting with their family members. Purpose of the article is to assess if and how family economic socialization impacts on investor behavior in real estate crowdfunding. Methods: Research data was collected through an online survey of Lithuanian real estate crowdfunding investors. Then structural equation modeling technique was employed to investigate the impact of family economic socialization on behavior of real estate crowdfunding investors. Findings & Value added: Findings revealed that majority of real estate crowdfunding investors make bounded rationality investment decisions. Family, as one of the main agents of the economic socialization, does not ensure rationality of the crowdfunding decision-making process. Purposive family economic socialization has no impact on the behavior of investors with bounded rationality, yet it has a significant impact on behavior of rational family members. Spontaneous family economic socialization proved to have a positive and significant impact on the behavior of investors with bounded rationality. Taking into consideration rapid global development of innovative financial services market, such results might be a troubling signal for the product developers and market regulators.
Highlights
In the 21st century financial system is undergoing substantial changes
Globalization, digitization and the growth of technological innovations influences the emergence of new financial services which, among all other things, alter existing risk and return based decision making criteria and shift behavioral, individual level factors to the forefront of decision making process
Our findings identified that a typical investor of real estate crowdfunding is a 25–34-yearold man with master’s degree, who works in a company, gets higher than average net month salary and lives in one of the five biggest Lithuanian’s cities
Summary
In the 21st century financial system is undergoing substantial changes. Global access to financial markets, digitalization and the growth of technological innovations are changing financial system and new financial services, such as real estate crowdfunding, are emerging. New innovative financial services feature exceptional characteristics, such as higher risk than traditional financial services, higher complexity, lower level or non-existent regulation, use of new technologies to develop and provide such services, and non-traditional suppliers Such characteristics of innovative financial services alternate the investment decision-making process, investor behavior is changing. Financial education, cognitive abilities or social networks play an important role in making real estate crowdfunding investment decisions. For this reason, the phenomenon of economic socialization becomes even more relevant and important to understand how investors in real estate crowdfunding behave. The aim of this article is to assess if and how family economic socialization impacts investor behavior of real estate crowdfunding, as one of the recently emerged innovative financial services
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