Investors’ trust and financial participation: Latent difficulty measurement

Abstract

This study uses trust theory and the Rasch measurement method to identify the latent diversification difficulties for Taiwanese individual investors. In terms of benevolence-based trust, investors are most doubtful of the portfolio choices of neighbors and friends, whereas they are least doubtful of workplace retirement plan as well as listed and well-known companies. In terms of competence-based trust, investors are most doubtful of information accuracy and access, whereas they are least doubtful of investment product familiarity and information sources. Female investors significantly distrust their social network; by contrast, married investors in their mid-30s and with lower education significantly distrust financial intermediaries. In terms of income level, it insignificantly influences the benevolence- and competence-based trust difficulties of investors. Investors in the northern region of Taiwan benefit the most from financial interaction and significantly put more benevolence-based trust and competence-based trust compared with investors in the southern and central regions, respectively. Investment experiences insignificantly influence the development of trust; nevertheless, investors experience more difficulty in trusting their social network in terms of benevolence-based trust than in trusting financial intermediaries in terms of competence-based trust.