The impact of country-of-origin cues on consumer investment behavior

Abstract

PurposeChoosing how to invest one’s assets is one of the more important decisions consumers are faced with. However, determining the objective financial quality of complex investment products such as mutual funds is not an easy task for consumers. Against this background, this study aims to clarify the potential impact of one, not necessarily rational, cue on consumer perceptions of financial quality in the investment context: the country-of-origin (COO) of the mutual fund or stock.Design/methodology/approachTwo Web-based experiments are used to test the study’s hypotheses.FindingsCOO is found to impact investors’ evaluation of the financial metrics of mutual funds, both in terms of perceived risk and potential return. Moreover, the results of Experiment 2 show that although a strong financial brand can partially overcome the COO effect, the extent of this effect is moderated by whether the fund utilizes an active or passive management style.Research limitations/implicationsAlthough mutual fund providers with a strong financial country image (CI) may leverage that image and build on their home country’s brand, providers from countries with a poor financial CI may do well focusing on passive management to minimize negative COO influence.Originality/valueThe results highlight that COO can be an important source of sub-optimal investment decisions. These insights are of high importance for efforts to improve consumer decision-making and for individual service providers.