Scripting the habitus

This study investigates the relative importance of trait anger and trait anxiety in financial decision-making. Given the disparate economic, cultural and social environments within an emerging market, this study focuses on South Africa to provide unique insights. The use of a student experimental cohort and hypothetical scenarios allows for the assessment of prima facie evidence of the merits of future research using more experienced participants and more realistic scenarios. Gender and race are incorporated as explanatory variables given the history of South Africa and the disparate opportunities amongst individuals of different races. Both variables are also notable indicators of financial behaviour and decision-making. A questionnaire was completed by 288 university students which measured Trait anxiety and Trait anger using the Anxiety Inventory and Anger Expression Inventory-2. Using multinomial logistic regressions, the results showed that White participants (rather than Black, Indian or mixed-race participants) and those individuals with higher levels of anger are more inclined to invest in equity. Alternatively, Women and individuals with higher levels of anxiety were found to be more risk averse. These findings are relevant to financial advisers as most of the predictive outcomes relate to risk which is vital in making investment decisions. While prior research has shown the relevance of personality traits on investment performance, the added dimension of gender and race adds practicality to the findings. It also highlights the necessity of including demographic variables when assessing personality traits.

Poverty remains a pressing problem in rural areas of the developing world. This is also true for India. Expanding the rural financial system with a focus on increasing access to credit has been an important approach for poverty alleviation in India. Nevertheless, there is empirical evidence and theoretical consideration that, credit markets fail for the poor in particular. Market failures can be either driven by moral hazard or adverse selection. In the case of moral hazard, the borrower can either devote insufficient effort to enable subsequent repayment (ex ante moral hazard) or he may voluntarily default (ex post moral hazard). His actions remain hidden. In both cases, the loan would not be repaid successfully. To avoid default, lenders may demand collateral in a form that the poor cannot provide. Adverse selection describes the process of relatively more risky borrowers selecting into loan commitments. If the lender cannot observe the riskiness of potential borrowers, due to information asymmetry, he may demand a higher interest rate in an effort to compensate for loan defaults by riskier borrowers. This may in turn preclude relatively risk-averse borrowers who may not be willing to bear the risk premium, which represents the compensation for the default risk of riskier borrowers. The relatively more risky borrowers remain in the market, and consequently, the likelihood of loan default increases. In the extreme case, this can result in a totally nonexistent credit market. To complement prior research which focused on the supply side and market failures of India’s rural financial system, we focus on rural households’ and individuals’ financial decision making in this study. We argue that this perspective can contribute to the understanding of outcomes of rural households’ financial decisions. In this study, we first shed additional light on the borrower as an individual, the means available and the limits to an individual’s financial decision making. Second, we stress the decision-making process within a household. Several individuals may be involved in this process and may determine the outcomes of financial decisions at the household level. The first objective focuses on an individual’s financial literacy, as it is central to undertake informed financial decisions. However, in the context of poverty, taxes on mental capacity may disturb an individual’s decision making. Mental capacity, which is limited for each individual, can be demanded by pressing financial obligations (e.g., education, health and social events) to which individuals may be exposed simultaneously. In contrast, non-poor individuals may be relatively less exposed to this tax. They may be exposed to the same financial obligations, but are able to settle them more easily, as they are not poor. We explore whether such a tax negatively affects an individual’s level of financial literacy. Experimentally, we show that for individuals, considered to be poor, such a tax negatively affects their level of financial literacy. In contrast, individuals who are not considered poor are not negatively affected by the tax. Moreover, we find that a financial incentive can act as a counter-measure. It increases the level of financial literacy. We recommend that policymakers consider measures that assist individuals in financial decision making when they have a lower level of financial literacy and to consider incorporating financial incentives in measures intended to increase financial literacy, e.g., in financial literacy training. Our research is informative on the relevance of financial decision making for poverty in rural India. We find that a tax on mental capacity negatively influences financial literacy in the context of poverty. Thus, financial literacy, which is central for informed financial decisions, is negatively affected. When informed financial decision making is hampered, it may become more difficult to escape poverty. In essence, this suggests a vicious circle, whereby poverty promotes the likelihood of the tax on mental capacity and the tax leads to worse financial decisions due to lower financial literacy. In turn, the likelihood of escaping poverty diminishes. For the second research objective, we focus on loan control among women who are members of a Self-help group (SHG) and have access to loans through the SHG. We analyze the influence of loan control on the likelihood that the households invest into agriculture. Agricultural investments are important for potential poverty reduction due to their productive nature. Moreover, agriculture is a traditional male domain in India. In our econometric analysis, we show that the likelihood of investing into agriculture declines with increasing loan control by women. The implication of our findings is twofold. First, this inverse relationship shows that households in which women have less loan control invest in domains over which women have no say, agriculture in our study. Thus, the women bear the obligation to repay while having no control over the loan. This may make it more difficult for SHG member women to repay their loans and to develop the reputation of being a reliable borrower. Second, although this burden contradicts the goal of empower¬ing women through access to credit, the household as a whole may still benefit from the productive agricultural investment. This is the tradeoff found in our study in the case of SHG lending. We suggest measures intended to diminish that tradeoff. Measures to encourage women’s agricultural investments are discussed. First, we elaborate on women’s access to land and markets in India. Second, we discuss the potential for diminishing the tradeoff through measures to increase loan control for women. In particular, we argue that it is worth exploring having loans that are not distributed directly to the SHG member women but are instead transferred to an agricultural investment counterpart. The women can then obtain goods or services from the investment counterpart and do not face the risk of losing control over the money when bringing it home. This research is informative for rural development because it identifies two diametrically opposed outcomes that are both important for rural development, namely potential monetary benefits at the household level through productivity-increasing investments and women’s empowerment in the area of loan control. This dissertation relies on data collected through a survey of 658 households between February and May 2014 in India. To conduct the survey, we visited the households of SHG member women. During the survey, we conducted an experiment that yielded the data for the first research objective. The second research objective relies on cross-sectional data from the survey.

Financial decision-making through social media blogs and opinions is an area not much explored by the researchers. This study intends to understand the perceived usefulness of social media in financial decision-making amongst individuals and groups based on demographic similarities and social parameters. This paper aims to understand the perception of various subgroups in society within the large population sample. The paper applies Mann-Whitney and Kruskal-Wallis non-parametric tests to examine the proposed research questions from a dataset of 201 individuals residing in two most populated states in Northern India. The analysis reveals the differences between different groups categorized based on generation, financially dependent, educational background, occupation, and geographical location. In terms of social media’s perceived utility in financial decision-making, results suggest that segregated groups based on cohort generation and occupation have significant variations relative to others. Based on the educational context, all other segments, number of financially dependent, geographical location, were found insignificant. The novelty of the paper lies in investigating the perceived usefulness of social media in financial decision-making amongst various homogenous groups based on demographics in a developing country. The study outcomes can be useful for the financial service providers and social media platforms in comprehending consumer behavior to devise an innovative marketing strategy for financial products targeting specific segments through enhanced coordination between them. AcknowledgmentThis paper was supported by Internal Grant Agency of FaME TBU No. IGA/FaME/2019/002.

This study analyzes the effect of funding decisions and dividend policy on firm value and their impact on stock returns for companies listed in the LQ45 index on the Indonesia Stock Exchange (IDX) during 2018-2022. The main issue addressed is the limited understanding of how interactions among funding decisions, dividend policy, and firm value affect stock returns. The population includes companies in the LQ45 index during this period, with samples selected through purposive sampling, targeting firms consistently listed and with complete data on the variables. Using a quantitative approach, this research employs causal analysis and Structural Equation Modeling (SEM) with SmartPLS to measure path coefficients and R². The study’s novelty lies in exploring variable interactions, unlike prior research focusing solely on direct impacts on stock returns. Results show that dividend policy positively and significantly affects firm value (path coefficient 0.288; p-value 0.002) and stock returns (path coefficient 0.346; p-value 0.000). Funding decisions significantly impact stock returns (path coefficient 0.240; p-value 0.014) but not firm value (path coefficient -0.035; p-value 0.385). The mediation of firm value is only significant between dividend policy and stock returns. The study concludes that dividend policy significantly impacts stock returns both directly and through firm value, while funding decisions affect stock returns directly. Future research should broaden the sample scope, extend the study period, and include macroeconomic factors to enrich analysis. A longitudinal approach is recommended for evaluating long-term impacts.

Legal minimum equity capital requirements aside, shareholders can generally freely decide whether to finance their companies with equity or debt capital. While it is a known fact that debt capital is generally tax-favored, in their annual financial statements many corporations report equity capital in excess of the minimum legal requirement. The shareholders' financing decisions may be motivated by special tax rules that were implemented in many countries in recent years (e.g., thin capitalization, interest barrier) in order to scale back the extent of debt financing and to prevent misuse of the debt financing option. A secondary aim of these special rules – which in Germany recently arrived in the shape of an interest barrier in order to protect the national tax base – is to increase companies' equity ratio. A significant stream in financial economics research has been dedicated to the complex problem of corporate capital structure decisions for many decades now. A number of these studies focus on the interest barrier. However, prior research in this field has so far mainly concentrated on how many companies are affected by this rule. So far there has been no attempt to examine the impact of the interest barrier on corporate decision-making concerning the capital structure. This paper uses model calculations to look at how the interest barrier influences the economic benefits of such corporate decisions. The aim is to find out whether the rule always causes investors to prefer equity financing over debt financing. We incorporate the interest barrier in Miller's (1977) capital structure model in order to analyze the barrier's influence on corporate financing decisions. It is demonstrated how the individual parameters in the various scenarios impact on the critical income tax rate. We find that whenever the individual income tax rate is in the interval of possible income tax rates, the equity versus debt capital decision may become irrelevant. We can conclude that, as a rule, both the model with a tax barrier and one without a deduction restriction can lead to a so-called 'Miller equilibrium'. It also emerges that the interest barrier causes debt financing to become a less attractive option. Because the amount of deductible interest depends on gross income, this indicator has a strong influence on the critical income tax rate. The lower the gross income, the less attractive the debt financing option.

Investment managers use financial numbers to assess the quality of their portfolios, which requires them to estimate the market value of their assets—i.e., the priced trading of such assets. Prior research has shown that investment managers tend to disregard information that does not easily integrate into financial numbers, such as environmental, social and governance (ESG) criteria. We argue that when investment managers use visuals to incarnate ESG criteria, they are more likely to accommodate societal issues in their financial decisions. We undertook a three-year ethnography of an asset management company to better understand how investment managers respond to ESG criteria. We found that fixed-income investment managers attempted to include ESG criteria in their financial models by financializing the data, so that ESG-related information could be commensurated with their existing models. Equity investment managers, on the other hand, did not financialize ESG issues, but introduced visuals, specifically emojis, to incarnate ESG issues. In this way, ESG criteria were juxtaposed against, rather than integrated into, financial criteria. In doing so, equity managers created a sense of dissonance between financial numbers and the visuals, which fostered creative friction. The visuals permitted equity managers to analyze the ESG criteria not only for their financial insights, but also for the social and environmental information that could not be financialized. We discuss the implications of these findings for prior research on financialization and calculative devices.

Policy makers have embraced financial education as a necessary antidote to the increasing complexity of consumers' financial decisions over the last generation. We conduct a meta-analysis of the relationship of financial literacy and of financial education to financial behaviors in 168 papers covering 201 prior studies. We find that interventions to improve financial literacy explain only 0.1% of the variance in financial behaviors studied, with weaker effects in low-income samples. Like other education, financial education decays over time; even large interventions with many hours of instruction have negligible effects on behavior 20 months or more from the time of intervention. Correlational studies that measure financial literacy find stronger associations with financial behaviors. We conduct three empirical studies, and we find that the partial effects of financial literacy diminish dramatically when one controls for psychological traits that have been omitted in prior research or when one uses an instrument for financial literacy to control for omitted variables. Financial education as studied to date has serious limitations that have been masked by the apparently larger effects in correlational studies. We envisage a reduced role for financial education that is not elaborated or acted upon soon afterward. We suggest a real but narrower role for “just-in-time” financial education tied to specific behaviors it intends to help. We conclude with a discussion of the characteristics of behaviors that might affect the policy maker's mix of financial education, choice architecture, and regulation as tools to help consumer financial behavior. This paper was accepted by Uri Gneezy, behavioral economics.

Heterogeneity of dividend smoothing: A strategic response to peer competition in China

Overhead aversion and facial expressions in crowdfunding

Government contracts and trade credit

When defining the capital structure of a company, the financing decisions are the most important and strategic aspect. Since its inception, several researchers have delved into this topic area. Taking into account the numerous structures and the outcome, several academics have demonstrated the best financial decision options. Even after years of research and analysis in the era of global capitalism, the topic of financial decisions remains rich and up to date. This review has looked at the topic of financing decisions research from 1952 to 2022 and shown how far it has come. This analysis compiles and examines prior research on the “theories, contexts, characteristics, and methods” (“TCCM”) of financial decision-making choices. In order to compile exhaustive data, a “seven-stage approach” (“SSM”) has been created. Scopus, Web of Science, EBSCO, and homepage of journal were mined for the research papers in order to forestall the fallacy of exclusion based on selection criteria of highly regarded journals and language. The paper's overarching goal is to point out pressing problems, unanswered questions, and promising new lines of inquiry that could be explored. This review includes 148 papers after extensive searching and careful evaluation. In order to get a full picture of an area, researchers perform a methodical examination of the relevant literature (called a "systematic literature review," or "SLR").  Findings from studies on the factors that influence and are affected by the final financial decision are mapped out in a comprehensive conceptual framework. In order to move this field forward, a framework for future study has been provided based on the findings of the in-depth content analysis. This study may lead to new ways of thinking about corporate finance, which in turn could change the game in terms of what kinds of funding choices businesses have at their disposal.

Low-income and working-class students face many challenges related to the costs and affordability of higher education; yet, little is known about the financial decisions made by these groups of students while they are enrolled in higher education and how their decisions might differ from middle/upper-class students. Using data from students enrolled at six large, public research universities in 2012, researchers examined 16 different financial decisions of undergraduate students. Results suggest that low-income and working-class students are more likely to make decisions that could negatively impact their immediate academic experience, serve as disruptive barriers to success, delay or prolong graduation, or lead to increased debt upon graduation.

One of the core issues in finance is to understand why firms finance themselves as they do. This issue has become increasingly important because how firms are financed influences their performance and value. Since the 1950s, the capital structure literature has addressed this fundamental issue by focusing on a firm's mix of debt and equity. However, firms often use more than one type of debt claim. Furthermore, some firms use certain types of debt claim that others do not use. The financing choices of various forms of debt claim and different amounts of debt issued lead to financial data with multiple continuous proportions and many zeros implied by debt structures. We propose a novel method for addressing such choice‐implied statistical issues. Our method is based on choice probability‐driven submodels and is empirically implementable even in large dimensions. Its performance is demonstrated by simulations. Its application to the analysis of debt structures of U.S. corporations reveals that the determinants of the choice to use a particular form of debt and how much of that type of debt to use are not identical: a valuable insight missing from prior financial research. Our methodology is applicable not only to firm financing decisions in corporate finance, but also to choices in other critical areas of finance such as household investment decisions in household finance. WIREs Comput Stat 2017, 9:e1399. doi: 10.1002/wics.1399This article is categorized under: Applications of Computational Statistics > Computational Finance Statistical and Graphical Methods of Data Analysis > Multivariate Analysis

Numeracy, the ability to understand and use basic probability and numerical concepts, is associated with diverse positive outcomes across the lifespan. Prior cross-sectional research on numeracy has generally found a negative association with age, but positive correlations with male gender, education attainment, and measures of fluid and crystallized intelligence have been more robust. Age effects on cognitive functioning are well established, but little is known about longitudinal trends of numeracy into older age. The present study investigates longitudinal age effects on numeracy using a sample of 524 adults (2008 Agerange = 20-78) from the RAND American Life Panel. Participants completed a numeracy measure in both 2008 and 2019, a span of 11 years. Using a linear mixed-effect model to predict numeracy scores, a significant interaction between the year of testing and the quadric age term shows a decline in numeracy scores beginning in later middle age, a trend that falls in between those previously found for crystallized and fluid cognitive abilities. Numeracy declines are somewhat mitigated for males and those with higher education, but the interaction of the two variables did not return a clear pattern of results. Prior research has shown that numeracy is positively related to the quality of health and financial decisions and, ultimately, more positive health and economic outcomes. The implications of age declines in numeracy are discussed in relation to health and financial decision-making, tasks that remain relevant into old age. (PsycInfo Database Record (c) 2022 APA, all rights reserved).

Recently, major e-commerce retailers like Amazon and Alibaba have started providing working capital loans to capital-constrained manufacturers selling through their marketplaces. Additionally, these platforms often introduce private labels (PLs), such as Amazon Basics, that compete with manufacturers' brands. This leads to a coopetative partnership between platforms and these small and medium enterprises, such as LonoLife, which compete with the platforms' PLs and also avail loans from them. Using game-theoretic analyses, we investigate the following question: How does the platform's PL introduction strategy impact a capital-constrained manufacturer's financing decision? The manufacturer manages the operational risk in its manufacturing process while selecting the optimal financing strategy, with or without the platform's PL. Intuitively, if the platform introduces the PL, as a strategic response, the manufacturer should consider opting for bank financing. However, the manufacturer does the opposite by switching to platform financing when the values of the production cost are within the intermediate range and the perceived quality of PL is low. Interestingly, the platform might adopt a cooperative strategy by not introducing the PL if the manufacturer decides to use platform financing. We recommend that the platform can utilise its PL effectively to mitigate operational risk in the upstream production process.