Advanced Financial Literacy Research Articles

FINANCIAL LITERACY, INFORMALITY, AND SMALL BUSINESS OPERATIONAL PERFORMANCE IN ZIMBABWE

Introduction: The exponential growth of small and medium enterprises (SMEs) in many developing economies is a well-documented phenomenon in business literature. However, research indicates that the expansion of most SMEs is hindered by financial illiteracy and high levels of informality, posing significant challenges to their performance and long-term sustainability. Concerns arise from the fact that only a small fraction of these enterprises successfully transition into larger firms. This study sought to address these issues by investigating the levels of financial literacy among 120 SMEs operating in Harare and Bindura, taking into account the pervasive informality within the sector. The research also aimed to evaluate the relationship between financial literacy and SME operational performance. Methods: Employing a quantitative approach within an explanatory research design, data collection was facilitated through a structured questionnaire. To capture the diverse landscape of SMEs operating in an informal context, both purposive and convenience sampling methods were utilized to select participants for the survey. Descriptive and inferential analyses were conducted using SPSS software. Results: The findings of the study revealed a significant positive impact of financial literacy on SME operational performance, indicating that advanced financial literacy can contribute to enhanced business outcomes. Moreover, the research observed an improvement in financial literacy within SME operations, evidenced by increased awareness and application of financial management skills. Conclusion and suggestion: The study recommends that efforts to promote financial literacy among SMEs should be intensified through advanced financial education initiatives, awareness campaigns, and enhanced financial inclusion strategies. Financial service providers are encouraged to play a proactive role in supporting SME growth by investing in financial awareness programs, funding educational initiatives, and actively engaging SMEs in key economic policy frameworks. Ultimately, SMEs are urged to fully embrace financial literacy as a fundamental pathway for achieving sustainable growth and long-term business success amidst the challenges of informality.

Financial literacy among Chinese rural households and its impact on stock-market participation

This study explores financial literacy (FL) and its influence on market participation among rural residents in China. Using the 2017 China Household Finance Survey, we find that rural residents have low FL and answer only 33% of basic and 20.8% of advanced questions on average. The findings indicate a substantial disparity in their FL skills. The ordinary least squares regression results reveal that advanced FL is statistically positively related to market participation. To mitigate endogeneity concerns, we adopt the instrument variable estimator within the generalized method of moment (IV-GMM). The IV-GMM results indicate that FL positively affects the market participation of Chinese rural households. The probability of market participation increases by over 7% with every unit increase in advanced FL scores. Additionally, the robustness tests confirm the positive correlation between advanced FL and market participation. Furthermore, the impact of FL on stock-market participation is more pronounced among rural residents in economically developed regions and those with greater financial assets.

Reforming Financial Literacy General Education in Colleges and Universities: Measurement of Financial Literacy level and Training Path of College Students in Higher Vocational Colleges in China

This study aims to evaluate the financial literacy levels of higher vocational college students in China through a questionnaire survey approach. It seeks to determine the overall financial literacy level and delve into the nuances of gender and family background heterogeneity. Drawing on existing methodological ideas for measuring financial literacy levels, this paper uses a questionnaire survey method to calculate the overall financial literacy level of higher vocational college students in my country. It also conducted an in-depth analysis of the characteristics of college students’ financial literacy levels from the perspectives of gender heterogeneity and family background heterogeneity. The results found that the overall financial literacy level of current college students in China is not high, with a quantitative score of only 39.18 points; regardless of basic financial literacy level, advanced financial literacy level, and overall financial literacy level, male college students' scores are generally higher than female college students. This difference is significant at the 1% level; college students in the financial group who have at least one parent with a financial degree or industry background have a higher financial literacy than college students in the non-financial group. The huge difference in the financial literacy of the two groups of college students is in the level of advanced financial literacy. It is more obvious. The research results suggest that colleges and universities should not only add general education to enhance financial literacy in general education courses but also set up financial literacy education courses at different stages based on students’ gender heterogeneity and family background heterogeneity.

Financial Literacy and its Determinants: A Case of Professionals in Colombo District Sri Lanka

This observation intends to examine the financial literacy level of professionals working in the professions of Medicine (Doctors), Engineering (Engineers), Management (Managers), Law (Lawyers) inclusive Aviation and Navigation (Captains and Pilots), and its determinants. The methodology was a quantitative survey approach involving a sample of 300 respondents from the Colombo district. The analysis revealed that Basic and Advanced financial literacy among professionals is at a medium level. However, the level of financial literacy was not at a satisfactory level among non-management professionals, particularly doctors and lawyers. The results of the Regression analysis revealed that Economic and financial education, self-analytical skills, the field of employment, and monthly income level as influential determinants of financial literacy. The professions with less exposure to economic and financial education have low financial literacy. Findings demonstrate the growing importance of implementing a national strategy to improve financial and economic educational programmes, particularly for individuals who are not working in the professions related to management.

The dynamic relationship between BTC with BIST and NASDAQ indices

Abstract The significance of digital investment has grown substantially, enabled by advancing technology, which provides digital monitoring of investment instruments. Consequently, analyzing these instruments has become imperative. In particular, investors are inclined to compare new investment opportunities with well-established global stock markets, seeking to capitalize on their advanced financial literacy. This study aims to employ econometric analysis to explore the dynamic relationship between Bitcoin and the BIST100 and NASDAQ 100 indices. The time frame for this investigation spans from January 1, 2017, to March 10, 2022. Stationarity was confirmed through unit root tests (ADF, PP, KPSS, ZA, FADF, and FFFFF ADF) for the subsequent utilization of Autoregressive Conditional Variance Models. Additionally, Generalized Autoregressive Conditional Variance and Dynamic Conditional Correlation Tests were conducted. Results from the Dynamic Conditional Correlation Test model revealed no statistically significant dynamic conditional correlation between Bitcoin and BIST 100. Conversely, a negative and significant dynamic conditional correlation emerged between Bitcoin and NASDAQ 100. Investors should not only monitor the market but also review academic studies before making investment decisions. In this regard, this study holds significant importance. The study is limited to the BTC, BIST, and NASDAQ indices. Researchers interested in the topic can increase the dataset to further enrich the study.

The Effect of Financial Literacy Mediated Financial Behavior on Decisions Millennial Investment

In general, although the financial literacy index in Indonesia has increased, this figure illustrates that not all Indonesians are included in the well-literate category, even the percentage is still far below 50 percent. With conditions like this, it is suspected that the Indonesian people do not fully have sufficient knowledge about Basic Financial Literacy which is the basic ability of financial literacy with the dimensions of numeracy, interest compounding, inflation, time value of money, and money illusion and does not fully have knowledge of Advanced Financial Literacy is an advanced ability of financial literacy that includes an understanding of investments (stocks, bonds, mutual funds, crypto assets) as well as risks and returns. In addition to Basic Financial Literacy and Advanced Financial Literacy, the financial behavior of the millennial generation can also be analyzed as a mediating variable to determine its effect on millennial generation investment decisions. Keywords: Basic Financial Literacy Advanced Financial Litration, Behavioral Finance, Investment Decisions.

Financial Literacy's Influence on Investment Decisions

Objective – This study examines how financial literacy affects Indonesia's millennial generation's financial behavior and investment decisions. This study will also look at the influence of financial literacy as mediated by financial behavior on the millennial generation's investment decisions. Methodology/Technique – This research utilizes quantitative methods. The demography for this study is the millennial generation in Jakarta, Indonesia, which comprises 15,575 people. A non-probability and purposive sampling strategy were used to sample 100 people. The analytical tool makes use of path analysis and Smart-PLS. Result - According to the study's findings, basic financial literacy does not impact the millennial age's investment decisions or financial behavior. Advanced financial literacy cannot impact the investment decisions of the millennial generation in Jakarta, but it can influence their financial behavior. The millennial generation's financial behavior might impact investing decisions. Basic financial knowledge does not influence Millennial investing decisions as mediated through financial behavior. Advanced financial literacy can influence Millennial investing decisions as mediated through financial behavior. Novelty - This research is expected to be a reference for the millennial generation in making investment decisions. The millennial generation is expected to increase financial literacy and improve financial behavior in making investment decisions. Type of Paper: Empirical JEL Classification: G2, G23 Keywords: Basic Financial Literacy, Millennial Generation, Financial Behavior, Investment Decisions Reference to this paper should be referred to as follows: Riwayati, H.E; Cahaya,Y.F; Markonah, M. (2023). Financial Literacy's Influence on Investment Decisions, Acc. Fin. Review, 8(1), 27 – 35. https://doi.org/10.35609/afr.2023.8.1(1)

Accounting and finance literacy and entrepreneurship: An exploratory study

The aim of this study is to investigate whether the level of financial literacy differs significantly among entrepreneurs in three European countries: Italy, Spain, and the UK. Moreover, I analyze whether financial literacy fosters or hinders entrepreneurial resilience and success. I find that the level of basic financial literacy is significantly lower among entrepreneurs in the UK. I provide an explanation based on job opportunities arguing that basic financial literacy increases the chances of survival of a business, whereas advanced financial literacy decreases it. I propose a taxonomy linking levels of financial literacy with different approaches to financial management. I conclude that a “conservative” approach to financial management (cash based, debt-averse and diversified) is more likely to guarantee survival even if it is not necessarily the best way to maximize firm value.

Examining the relationship between financial literacy and demographic factors and the overconfidence of Saudi investors

The study explores the effects of demographic factors on basic and advanced financial literacy and financial knowledge perception. Complete data from 468 investors were collected via convenience sampling and analyzed with various technologies. Saudi investors did better on basic than advanced financial literacy questions. The regression result reveals that most demographic factors affect basic and advanced financial literacy. Only income level and occupation affect overconfidence in financial expertise. The current study is unique to the Saudi context and gives policy implications to increase financial knowledge among Saudi Arabians to promote better financial well-being and avert future financial distress.

Financial literacy as a determinant of market participation: New evidence from China using IV-GMM

We analyze the relationship between financial literacy (FL) and market participation among Chinese households. Our ordinary least square (OLS) regression results show that advanced FL is statistically positively related to market participation. Because of endogeneity concerns between FL and market participation, researchers have challenged OLS results for their bias and inconsistency. We consider the instrumental variable estimator using the generalized method of moments (IV-GMM) that aims to remedy endogeneity issue. We perform the Hansen J test of over-identification restrictions to ensure that the excluded instruments are appropriately independent of the error process. The IV-GMM estimates show that individuals with a higher advanced FL score are more likely to invest in stock markets. Specifically, with an additional one point of the advanced FL score, the probability of market participation will increase by about 12% points. We also perform robustness tests using different model specifications and different FL measures. Results are consistent with the main finding that advanced FL is positively related to market participation. Based on the results of the IV-GMM, we conclude that individuals with a higher level of advanced FL are more likely to participate in stock markets.

Role of financial literacy in investment choices of financial consumers: an insight from India

PurposeThe study aims to address two objectives. First, to examine the socioeconomic and demographic factors contributing to financial literacy and second, to analyze if financial literacy affects investment choices.Design/methodology/approachThe study uses financial inclusion insights (FII) survey data conducted by Intermedia, comprising 47,132 individuals in India. Further, instrument variable estimation has been used to analyze the relationship between financial literacy and individuals' investment choices.FindingsThe study finds that differences in financial literacy level can be attributed to various socioeconomic/demographic factors like age, gender, education levels, income, location of residence, sources of information, etc. Econometric analyses indicate that financial literacy influences investment decisions, mainly in businesses and traditional assets such as gold, property, etc.Originality/valueThe study contributes to the growing literature on financial literacy in the context of developing countries like India and highlights the role of financial literacy in how individuals make investment choices. Using a novel instrument, i.e. participation in the stock market by family or peers for advanced financial literacy, the results provide evidence that advanced financial literacy among individuals increases the probability of their stock market participation.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-12-2021-0764.

Education and financial literacy: Evidence from compulsory schooling law in China

In this paper, we explore whether educational attainment affects financial literacy. Exploiting the exogenous variation in the implementation of the Compulsory Schooling Law in China, we estimate the causal effects of education on financial knowledge acquisition and explore the potential mechanisms. Using urban household data from the 2018 China Family Panel Studies, we find that educational attainment is associated with higher levels of financial literacy, and this relationship is likely causal. Further analysis reveals that math skills and sociability are two factors underlying the education-financial literacy nexus. Moreover, the positive effects of education on financial literacy are robust to several robustness checks, such as placebo tests, alternative measures of financial literacy, and sample restrictions. Finally, we show that educational attainment significantly improves basic literacy but exerts a trivial effect on advanced financial literacy. Our findings shed lights on how to improve financial literacy among a broad population.

A note on financial literacy among literate people and their participation in different securities market segments

PurposeThis paper aims to investigate the relationship between perceived and actual financial literacy, among generally literate people, pertaining to market participation and market participation intensity. It examines such market participation in both the traditional segments of the financial markets and the new segments [cryptocurrencies, structured retail products (SRPs) and crowdfunding].Design/methodology/approachThe data are from a survey conducted in 2020 by the Portuguese Securities Commission in cooperation with 12 Portuguese universities. The final sample comprises 2,054 respondents. The basic and advanced financial literacy indexes were calculated following van Rooij et al. (2011). This paper uses probit regressions and ordinary least squares regressions with robust errors.FindingsThis study shows that even highly literate people are influenced by their perceived financial knowledge and its bias toward their actual skills. However, overconfidence has no significant association with securities market participation but rather is marginally correlated with the intensity of such participation. Underconfidence is negatively related to both. Moreover, the relationship between advanced financial literacy and overconfidence pertaining to participation in more complex market segments depends on the product type. Specifically, overconfidence has a positive relationship with participation in cryptocurrencies and SRPs but not with crowdfunding.Research limitations/implicationsThe securities market regulators should take note that participation in some complex market segments, even among literate people, is associated with investor overconfidence. Given that effective financial literacy correlates with participation in some more complex financial market segments and not others, the implication for future research is that the performance of individual investors may differ across these different segments. Additionally, this paper argues that the metrics used to assess financial literacy must take cognizance of the topics required to participate in the new market segments of financial markets.Originality/valueThis paper augments this stream of literature in several respects. First, it focuses on highly educated and trained people rather than the general population. Second, while the previous literature measures market participation using a simple dummy to identify respondents who invest in stocks, this paper also measures the intensity of participation. In addition, this study investigates the financial literacy effect from participation in the more complex segments of the securities markets, as in the case of cryptocurrencies and SRPs.

Study on the Impact of Financial Literacy of the Rural Population on Microfinance: In Association with the Middeniya East Grama Niladhari Division, Sri Lanka

The research focuses on the poverty-stricken rural communities that use the sector's state and commercialized micro-products: To empower the people associated with the microfinance sector economically and socially and To eradicate poverty in the rural community and raise the standard of living and To find out to what extent personal financial literacy has become a decisive factor The research employed a questionnaire to collect empirical data from 100 households by using random sampling in the Middeniya East Grama Sewa Division, which uses microfinance facilities. Accordingly, personal financial literacy was considered the intrinsic variable, and the efficiency of using financial facilities was used as the extrinsic variable. While reviewing information on personal financial literacy, a lot of data was gathered by presenting questions related to basic financial and advanced basic literacy. Accordingly, a standard multiple regression analysis was carried out to identify the impact of literacy on microfinance affairs. The finding of the multiple regression model was M= -27.7129+ 0.410357L+0.324577AFL. The two intrinsic variables, basic financial literacy and advanced financial literacy showed a corresponding connection related to rural people's micro financial dealings. The performance of utilization of microfinance depends on the person's basic and advanced financial literacy. Accordingly, when basic financial literacy and advanced financial literacy increase, the performance of utilization of microfinance increases.

Investigating the Moderating Roles of Basic and Advanced Financial Literacy between Behavioural Biases and Stock Buying Decisions

This empirical research investigates whether investors in Pakistan Stock Exchange are influenced by a set of behavioural biases while making stock buying decisions. Subsequently, this study evaluates as to what extent active stock investors are financially literate at basic and advanced level and test whether basic and advanced financial literacy moderate the effects of behavioural biases on stock buying decisions. Five-point Likert scale has been used to measure the reflective constructs of behavioural biases and stock buying decisions. Sample size of 326 respondents from Karachi and Hyderabad cities in Pakistan has been used, employing convenience sampling, to analyze the data using descriptive statistics and Partial Least Square Structural Equation Modeling. Out of seven biases tested, Anchoring and Adjustment bias is found to have negative significant effect on stock buying decisions while Herd Mentality bias and Availability bias are found to have significant positive effect on stock buying decisions. Active stock investors were found to have high level of basic financial literacy whereas advanced financial literacy was present at a moderate level. Basic financial literacy moderates the association between herd mentality bias and stock buying decisions while advanced financial literacy moderates the relationship between mental accounting bias and stock buying decisions.

Financial Literacy, Financial Advice, and Stock Market Participation: Evidence From Malaysia

The study examined the influence of financial literacy and financial advice on individuals’ stock market participation in Malaysia. Using survey data from 216 individuals aged 18 years old and above, this study revealed that both financial literacy and financial advice were positively associated with the likelihood of participating in the stock market. Individuals with higher financial literacy, especially advanced financial literacy, were more likely to participate in the stock market. Those who sought advice from financial advisors were also more likely to invest in the stock market. The findings underscore intervention opportunities for regulators, educators and financial advisors in promoting stock market participation in emerging countries.

Financial Planning for Retirement: The Mediating Role of Culture

The life expectancy rate of individuals worldwide has risen, and Saudi Arabia is not excluded. Rising long-life expectancy may jeopardize employees’ pensions and reduce the chances of adequate earnings and a decent life after retirement. Moreover, the number of employees, who have paid into pension funds and are now retired, has increased, indicating that pension funds are expected to decrease. Apart from the above, the level of financial literacy in Saudi Arabia was substandard. Therefore, the ultimate objective of this research is to examine the measurable factors that could impact employees in their financial planning for retirement (FPR). These factors comprise the employee’s financial literacy (FL), financial risk tolerance (FRT), and cultural factors based on the CWO model. Moreover, this study aims to investigate the mediating roles of culture in their relationship with financial planning for retirement. Primary data was collected during the COVID-19 pandemic from mid-July 2020 until the end of January 2021 using a non-probability convenience sampling approach involving 525 participants. The Structural Equation Modelling (SEM) technique was used to analyze the data. To determine the type of study variables, either a formative or reflective model of Confirmatory Tetrad Analysis (CTA-PLS) was used. The results show the significant influence of basic FL, FRT, and culture on FPR. Moreover, it shows the critical role of culture among those with advanced FL and FRT. Previous studies have examined FL and FRT in FPR without considering the effect of culture as a mediator.

Analisis Literasi Keuangan dan Faktor Demografi: Studi Pada Pasangan Muda

This study aims to describe financial literacy based on demographic factors. The respondents involved were 401. Data collection using questionnaires. Data analysis uses crosstabulation. Financial literacy uses index financial literacy calculations which are divided into two parts, namely basic financial literacy and advanced financial literacy. Demographic factors consist of gender, age, occupation, years of service, income, and education. The results showed that they who had more income were known to have better basic and advanced financial literacy. Some interesting things were found related to the continued financial literacy of young couples, namely men who are better than women, the more age the better the literacy, the better the entrepreneurial literacy compared to those who work as employees, those who have a longer working period and Higher education has better financial literacy. Keyword: demography, financial litearcy, gender, age, job

Financial Literacy Among Millennials

Financial literacy aids the investor in devising rational financial decisions which in turn provides financial stability to an individual and has emerged as a key to economic development in this rapidly changing financial and investing landscape. A financially illiterate person will make poor financial and investment choices which will have a detrimental effect on their financial wellbeing. The present study aims at assessing the level of basic and advanced financial literacy as well as its association with the demographic profile of millennial investors in the Delhi-NCR Region. A Chi-square test was used to analyse the data collected for the study. The findings revealed that millennials' financial literacy is low and they have poor knowledge about the time value of the money concept and find bond prices by the interest rate concept hard to comprehend. The study concludes that financial illiteracy is acute in females. The common belief that higher education qualification is an indicator of higher financial literacy holds for the study. The millennials with a lower level of income have a lower level of basic and advanced financial literacy. These conclusions were found to be statistically significant. This paper fills the research gap of millennials' financial literacy in India.

Do Financial Literacy and Technology Affect Intention to Invest in the Capital Market in the Early Pandemic Period?

Research aims: This paper discusses the effect of financial literacy and automatic investment technology on intention to invest in the capital market during the early pandemic.Design/Methodology/Approach: The research population was students studying economics and finance in institutions located in Yogyakarta Special Region Province. The sample of 384 respondents was obtained through questionnaires distributed online. To test the impact of financial literacy and automatic investment technology on intention to participate in the capital market, multiple linear regression was used.Research findings: The researchers found that financial literacy and automatic investment technology affected students’ intention to invest in the capital market. The number of students with a moderate level of financial literacy score dominated, followed by the students with low and high literacy scores. Besides, students’ background in economic and finance appeared inadequate to solely determine the financial literacy score.Theoretical contribution/Originality: This paper contributes to the investment area, especially related to the automatic investment technology “Robo advisor,” that is still rarely studied yet, which will be a significant issue in the future. It also provides empirical results, which explain the investment intention through financial literacy. Moreover, this study was conducted during the massive growth of investors in Indonesia during the pandemic.Practitioner/Policy implication: This study provides a useful reference to the financial sector, especially the capital market. Inclusive programs regarding financial literacy should be expanded for wider society to enhance their knowledge and dismiss lack of confidence in capital market participation. Private sectors providing automatic investment technology are suggested to continue developing a more convenient application to be accessible by a broader range of society.Research limitation/Implication: The research included only students as the sample; hence, further research may use a larger area of the sample with various backgrounds and ages. Other determinants, such as norms, environment, risk, and more advanced financial literacy measurement, can also be added to enrich future studies and literature.