Financial Decisions Research Articles

Unpacking the Impact of Asset Structure and Sales Growth on Capital Structure: The Moderating Influence of Profitability

This study explores the impact of asset structure and sales growth on capital structure, emphasizing the moderating influence of profitability. As firms navigate the complexities of financing decisions, understanding how these variables interact is crucial for optimizing capital structure. The findings reveal that asset structure and sales growth significantly affect capital structure, with profitability playing a critical role in moderating these relationships. Firms with substantial tangible assets are better positioned to leverage debt financing, while those demonstrating strong sales growth are viewed favorably by investors and creditors. However, the extent to which sales growth influences capital structure is contingent upon profitability; high profitability enables firms to capitalize on growth opportunities, whereas low profitability may inhibit their capacity to leverage growth potential. Empirical research supports these conclusions, indicating that asset structure, sales growth, and profitability significantly shape capital structure decisions across various industries. Ultimately, this study provides valuable insights for financial managers, highlighting the importance of balancing growth aspirations with profitability to achieve effective capital structure management. This, in turn, can lead to sustained competitive advantage, a state where a firm outperforms its competitors over a prolonged period in a dynamic economic environment.

Mindful Wealth Management: Thematic Integration and Analysis of Mindfulness in Financial Decision-Making

Purpose: This paper explores the influence of mindfulness on financial decision-making, aiming to develop a comprehensive framework that integrates psychological and behavioral finance perspectives. It addresses gaps in current literature, including the limited exploration of personality traits like openness and conscientiousness and the role of mindfulness across generations. Study Design: The research employs a conceptual analysis based on a comprehensive literature review, synthesizing insights from psychology, finance, and neurobiology. The study also examines the intersection of mindfulness and emerging financial technologies such as robo-advisors and cryptocurrencies. Findings: The study identifies how mindfulness influences financial behaviors, particularly in risk aversion, cognitive flexibility, and emotional regulation. It highlights generational differences in financial decision-making and mindfulness’s role in navigating digital financial environments. Contributions: This paper introduces a revised conceptual framework that expands the understanding of mindfulness in financial decision-making. It includes new dimensions, such as personality traits, generational differences, and the interaction between mindfulness and digital finance. Implications: The findings provide actionable insights for financial advisors, practitioners, and policymakers. Recommendations include the integration of mindfulness-based strategies tailored to individual traits and generational needs, as well as mindfulness training in leadership development programs to foster ethical and resilient decision-making.

Determinants of financial planning decisions for salaried individuals: Evidence from India

In the Indian context, financial planning for salaried individuals has gained increased importance due to economic fluctuations, rising living costs, and the need for robust retirement planning. Despite its importance, there is limited research on the specific factors that influence financial decision-making among salaried employees in India. Understanding these determinants is essential for developing effective strategies to enhance financial well-being among employees. This study explores the key factors influencing financial decision-making among employees, including financial goals, emergency savings, retirement planning, budgeting, financial confidence and literacy, financial stress, use of tax-saving instruments, income level, risk tolerance, and debt levels. A sample of 549 employees from diverse sectors in Uttar Pradesh participated in this research, highlighting the critical aspects of personal financial management that impact financial well-being. The study used a questionnaire-based survey to gather data on factors affecting financial decision-making. Descriptive statistics, correlation, and regression analyses were employed to identify significant predictors. The results reveal that financial literacy, access to resources, attitudes toward retirement planning, and cultural norms significantly influence financial decisions. Additionally, income level, job stability, and social support are crucial in shaping employees’ financial planning. The study recommends enhancing employees’ financial decision-making by offering financial education programs, budgeting tools, retirement planning assistance, debt management programs, tax planning workshops, financial counselling services, and employer match programs for retirement savings. These initiatives aim to boost financial literacy and confidence, enabling employees to make informed financial decisions and improve their financial well-being.

Delegation of financial decision-making to spouse in old age

Delegation of financial decision-making to spouse in old age Professor Anup Basu from Queensland University of Technology explains the process of delegating financial decision-making to spouses in old age. Ageing can cause cognitive abilities to decline, adversely impacting financial decision-making capacity. Although in many married households, one spouse is primarily responsible for managing household finances, discharging this responsibility can become challenging with age, and it may become necessary to share it with the other spouse.

Financial and Tax Literacy: A Child’s Early Exposure to Financial Concepts during the Educational Process

Aims: The viability of states today is largely based on the collection of tax revenues, which are considered as necessary for them to carry out their specific functions. Thus, the aim of this text is to discuss the development of citizens' tax culture, not as an isolated economic phenomenon but, as a phenomenon directly linked to their general financial literacy. Because it is the writer's belief that simply complying with the mandate to fulfill the tax obligation is not enough for the citizen to understand his contribution to the finances of his country, or, better, to appreciate this contribution in the context of understanding the ways in which the world moves financially. Methodology: It is a big question on how financially educated the modern man is and to what extent this financial education, his literacy or financial literacy, includes the concept of tax in its content to a sufficient extent to awaken consciences. In this text, the focus is on the exact age / educational stage at which this path to financial and tax literacy can begin, so that it can be integrated in a systematic way into the formal educational process. In order to draw conclusions about the appropriate stage for initiating financial awareness, the trends in the global financial literacy landscape were explored. This analysis aims to determine when it is considered appropriate to teach children financial concepts and how financial literacy is linked to making appropriate financial decisions and tax awareness at different age stages. An effort was carried out to evaluate the current financial and tax knowledge and behavior of Greeks. The research was exclusively bibliographic, i.e., a meta-analysis based on previous qualitative and quantitative studies. Results: Concerning the introduction of systematic financial and tax education for adolescents in schools, the studies accessed suggest that the age range of 12-14 marks a significant milestone for young people to begin delving into the more intricate concepts of the modern economy. Tax awareness among adolescents could arguably be attainable from around age 11 or 12, as they start demonstrating financial comprehension comparable to that of adults. Discussion: The findings of this research showed that the level of financial literacy in Greece depends on demographics, such as the geographical location and the gender of young people. Other factors are also important, but removing geographical and gender restrictions, combined with the provision of training programs already in the upper grades of Primary School, can improve financial awareness and develop the tax culture of citizens. This development requires the implementation of subjects in the curriculum, the training of the teachers so that they are able to teach children even 11 or 12 years old, the distinction of the concept of ethics from tax ethics and its teaching at an earlier age stage, and the drawing from international educational practices, i.e. leveraging successful financial literacy programs worldwide in order to obtain valuable insights for designing effective youth training initiatives.

Reinforcement learning-based portfolio optimization with deterministic state transition

Portfolio optimization has attracted substantial interest within the artificial intelligence community due to its significant impact on financial decision-making, risk management, and market analysis. Reinforcement learning fits well with portfolio optimization because their goal is to maximize cumulative returns. In reinforcement learning, state transition probabilities are often unknown and must be estimated. However, in portfolio backtesting experiments, these probabilities are deterministic, making the conventional reinforcement learning approach to estimating state transitions suboptimal for portfolio optimization. Addressing this issue, this study decomposes the portfolio optimization into two core tasks: prediction and profit policy optimization and proposes a novel reinforcement learning framework that assumes deterministic state transition probabilities, comprised of three main modules: feature extraction, prediction, and profit strategy optimization. To model assets more effectively and comprehensively, we capture their temporal features, relational features, and market state. We introduce a patch-wise correlation method and attribute based gate to enhance feature extraction. In the profit policy module, we utilize a deterministic strategy, employing a recursive reinforcement learning method based on Monte Carlo sampling to train the policy network. This enables dynamic adjustments of asset investment weights, ensuring the maximization of cumulative returns. Extensive experiments conducted on cryptocurrency datasets demonstrate the superior performance of our approach, and achieving 36.6%-75.6% improvements in main measurements on cryptocurrency datasets.

Dynamics of capital structure determinants: empirical evidence from GCC countries

AbstractThe study empirically examines the factors affecting the financing decisions of non-financial listed companies in Gulf Cooperation Council (GCC) countries. Using static and dynamic two-step generalized method of moments techniques, it analyzes unbalanced panel data from 364 non-financial companies across six GCC countries from 2011 to 2021. The findings partially support optimal capital structure theories, highlighting significant internal factors such as profitability, market-to-book ratio, firm size, earnings volatility, and growth opportunities that influence financing decisions. While no single theory fully explains the financing choices, the association of internal factors with book and market leverage is consistent. The study provides robust and generalizable results, aiding financial institutions and policymakers in formulating pro-development policies and regulations. This research facilitates better coordination between corporate managers and financial institutions, supporting the region’s economic transition. It is the first study to use extensive data from GCC non-financial firms to investigate financing decisions, offering valuable insights for investors and a basis for further analysis of capital structure choices in the region and beyond.

Behavioral Biases and their Influence on Financial Decisions: An Analysis of Social Entrepreneurship in a Medium-Sized City

In recent years, entrepreneurship has been an alternative economic livelihood that independently seeks to generate employment and in turn the economic growth of countries. Social entrepreneurship is a topic of great importance in recent research, however, there is still not enough empirical evidence to analyze the rationality of decision making. Given the social factor they pursue, it is possible that they may be affected by behavioral distortions that influence their rationality, especially in three financial aspects: investment, savings and indebtedness. Therefore, the objective of this work is to determine the existing influence between behavioral biases and financial decision making of social enterprises in the canton of Cuenca. The study is a descriptive-correlational cross-sectional approach, using structural equations from Partial Least Squares (PLS). The sample obtained is 162 social enterprises. The results show a significant positive influence of overconfidence, procrastination, status quo, and negative influence of over optimism on investment decisions. Also, procrastination and status quo directly influence savings decisions, but the gambler's fallacy indirectly. On the other hand, the risk aversion, overconfidence, over optimism and status quo biases were significantly influenced on borrowing decisions

Cracking the Code: Hidden Choices and Visible Impacts Pattern Recognition in Corporate Finance

AbstractResearch in corporate finance suffers from bounded rationality due to static modeling. Adopting factor analysis, an unsupervised machine learning approach, and balance sheet information (accounts) over time, we find underlying dynamic latent corporate finance decisions. Our study identifies three latent corporate finance decisions adopted by executives in Pakistan, (1) long-term capital investment, (2) short-term debt credit, and (3) financial flexibility. The order of the decisions and the empirical tests highlight agency problems rooted in familial ownership concentration. We find that long-term capital investment and short-term debt credit decisions significantly reduce the firms’ present and future performance. Conversely, managers do not embrace financial flexibility, despite its ability to improve performance. The study highlights a contradiction, firms bounded by ownership concentration prefer control over performance and do not make decisions to optimize and protect minority shareholders’ wealth, depicting a moral hazard problem.

Moderation of Life Style on the Influence of Financial Literacy and Self-Control on the Saving Behavior of Millennial Employees in Denpasar City

This study aims to analyze the influence of financial literacy and self-control on the saving behavior of millennial employees, as well as the moderating role of lifestyle in the relationship. Financial literacy, which includes an individual’s understanding of basic financial concepts and money management, is hypothesized to play an important role in increasing saving behavior. Self-control, an individual’s ability to resist consumer impulses and make wise financial decisions, is also considered a key factor influencing the tendency to save. However, excessive consumption behavior as part of the millennial lifestyle can potentially hinder savings efforts even though they have adequate financial literacy and self-control. In this study, lifestyle is modeled as a moderating variable that can weaken or strengthen the influence of financial literacy and self-control on saving behavior. Data collection was conducted through a survey of millennial employees from various job sectors. Data analysis used the moderated regression method to test the interaction between financial literacy, self-control, and lifestyle in influencing saving behavior. The results showed that financial literacy and self-control had a significant positive effect on saving behavior. However, lifestyle acts as a negative moderator, where a consumptive lifestyle weakens the relationship between financial literacy and self-control with saving behavior. This finding provides practical implications for individuals and companies, especially in raising awareness of the importance of lifestyle control and financial literacy to encourage better saving behavior among millennial employees.

Financial Inclusion Knowledge, Spending Behavior, and Ease of Use on Interest in Using the DANA Application

This study aims to examine how financial inclusion knowledge, spending behavior, and ease of use influence students' interest in using the DANA application. Financial inclusion knowledge is considered important as it provides an understanding of digital financial products and services, while spending behavior reflects how individuals manage their expenses and make financial decisions. Furthermore, the application's ease of use is a key factor that can influence users' interest in adopting financial technology like DANA. This research employs a quantitative approach using a survey method. Data from 100 students in Deli Sumatera University's management study program was collected using a questionnaire and analyzed using multiple linear regression. The research results show that knowledge of financial inclusion, spending behavior, and ease of use have a positive and significant impact on the interest in using the DANA application. Among these three variables, knowledge of financial inclusion has the most dominant influence on the interest in usage. The more students know about financial inclusion, the more they want to use DANA. In addition, planned spending behavior and the ease of using the DANA application also play a significant role in encouraging interest in using the app. Based on these findings, this research contributes to understanding the factors that influence interest in using digital financial applications and supports the enhancement of financial inclusion among students

From Financialization to Sustainability: The Impact of Climate Risks on Shadow Banking Activities in Non-Financial Firms in China

Climate risks are increasingly shaping corporate strategies, raising important considerations for sustainability. This study explores the impact of climate risks on the shadow banking activities of non-financial firms, examining how these risks influence sustainable financial practices. Analyzing a sample of Chinese listed firms from 2010 to 2022, this study finds that climate risks are negatively associated with shadow banking activities, reflecting a shift towards more sustainable financial management. This finding remains robust through various robustness checks and tests for endogeneity. Heterogeneity results indicate that the reduction in shadow activities due to climate risks is more pronounced in firms with higher dependence on external financing and weaker profitability. Mechanism results suggest that climate risks amplify cross-sectional risks for firms, increasing risk sources. Simultaneously, companies enhance their preference for holding cash to address potential risks. The combined effect of these factors leads to a decrease in shadow banking activities among non-financial firms, aligning with a shift towards sustainability. This study provides new insights into understanding how climate risks drive sustainable financial decision-making and enriches the research on the determinants of firm financialization.

A STUDY ON WORKING WOMEN’S FINANCIAL DECISIONS IN BANGALORE NORTH

This study investigates the financial decision-making patterns of working women in Bangalore North, focusing on the factors that influence their personal finance management and investment choices. Through a combination of surveys and interviews, the research explores the impact of demographic variables such as age, education, income level, and marital status on financial decisions. It also examines the role of societal expectations, family responsibilities, and financial literacy in shaping their ability to make informed financial choices. The findings highlight both the progress and the challenges that working women face in achieving financial independence. Despite an increasing number of women participating in the workforce, many still encounter barriers to effective financial planning, including limited access to tailored financial products and a lack of comprehensive financial education. The study concludes by recommending policies and initiatives that aim to empower working women, enhance their financial literacy, and support their pursuit of financial autonomy. KEY-WORDS: Societal Expectations, Family Responsibilities, Financial Independence, Financial Planning, Demographic Factors, Empowerment, Gender and Finance, Workforce Participation

Analysis of the transformation of demand willingness for housing reverse mortgages in China based on a scenario simulation experiment

AbstractAs the population rapidly ages, Housing Reverse Mortgages (HRMs) have emerged as a valuable addition to the multilevel pension insurance system, helping to alleviate the pressure on pension financing. However, the HRM market in China faces challenges due to the limited financial literacy among middle‐aged and elderly residents; there is a “cognitive bias” toward understanding the mechanisms and benefits of HRMs leading to “insufficient effective demand.” This study empirically investigates the likelihood of changing the “demand willingness” for an HRM through a scenario‐simulation experiment focused on HRM‐related information disclosure. The findings include: (1) Up to 46.78% of the subjects' attitudes toward adopting HRMs shifted from “unwilling” to “willing” after receiving disclosed information, indicating that cognitive bias significantly impacts the insufficient effective demand for these housing products. The information disclosure experiment can correct the inadequate financial literacy to a certain extent, thereby significantly enhancing the potential demand willingness. (2) After the experiment, subjects with strong motives to bequeath their property to family members (referred to as “strong bequest motives”) significantly changed their willingness to adopt HRMs (“demand willingness”). This suggests that a clear, comprehensive promotional strategy can better align middle‐aged and elderly residents' perceptions of the role of HRMs in protecting inheritances, reducing the impact of bequest‐related considerations on their financial decisions. (3) Participants initially exhibiting lower financial literacy also demonstrated notable shifts in their demand willingness postexperiment. Access to easily understood, high‐quality information appears to help older individuals recognize the potential benefits of HRMs, mitigating the negative effects of cognitive limitations on their decision‐making. These findings highlight the importance of enhancing financial literacy and promoting a better understanding of HRMs among middle‐aged and elderly individuals, which may effectively manage the challenges associated with an aging population and the pressures on pension financing.

Personal Financial Management Training for Indonesian Migrant Workers in Hongkong

Hong Kong became the country most frequently chosen by Indonesian Migrant Workers (IMW) in 2021. The reasons that motivate IMWs to work in Hong Kong are the relatively high wages offered and the atmosphere of freedom. However, the departure of IMWs abroad has not significantly contributed to improving their quality of life. Observations made through various mass media sources (Dewi et al., 2022) concluded that many Indonesian Migrant Workers (IMW) still lack sufficient knowledge and understanding of financial dimensions or aspects. Therefore, education on the importance of financial management for IMWs is crucial. This is because the majority of IMWs do not yet possess adequate knowledge regarding financial management. The form of education is delivered through training aimed at teaching IMWs about the importance of financial planning. The materials provided include budgeting, saving, budget tracking, and investment, which are essential for effective personal financial management. It is hoped that this training will equip IMWs with the necessary knowledge to make sound financial decisions. After the training sessions, a post-test was conducted using the same procedure as before, where participants were given a questionnaire with 10 multiple-choice questions. The post-test results showed that, compared to the pre-test, the proportion of correct answers for each question was significantly higher. On average, the proportion of correct answers for all questions was above 90%. Thus, it can be concluded that the provision of training and assistance on investment and personal financial management was effective in improving the financial literacy of IMWs in Hong Kong.

Real-World Geopolitical Influences on In-Game Financial Behaviour

This paper explores how real-world geopolitics can influence financial decision-making in virtual environments. The study primarily focuses on trading dynamics in a pandemic simulation game. The players manage resources and trade with each other to save their population. We compared two groups: one playing with made-up country names (control) and another with real country names (test). The players were not permitted to communicate outside of the resources the game provides and were finally ranked based on the number of months survived and trade volume. Our findings reveal two distinct player archetypes, one focusing on maximising trade volume and a second focusing on resource conservation. Real country names compared to color-coded labels seem to delay the perception of competition and reduce overall trade volume, suggesting increased immersion and a more conservative approach towards resource management. Observations from gameplay footage reveal instances of potential bias, with players forming diplomatic ties based on national identities. The data collected suggests that real-world geopolitics can influence financial behaviour in virtual environments as hypothesised. It also explores virtual environments to study how political narratives and dynamics affect human decision-making. The findings offer practical insights for game developers regarding fostering player engagement, mitigating bias, and creating fair economies. While parallels with real-world resource trading and allocation during pandemics were noted, further analysis would be required to explore these connections.

Inventory pledge financing decisions based on a permissioned blockchain by controlling fraudulent risk

Inventory pledge financing (IPF) is a crucial financing way for small and medium-sized enterprise (SMEs). But banks are reluctant to finance SMEs due to fraudulent risk in practice. This paper discusses the application of blockchain in IPF, particularly its impact on mitigating fraud risks. Utilizing game theory models, we illustrate how the finance and operation decisions of participants, along with supply chain efficiency, are influenced by the introduction of blockchain. Meanwhile, equilibrium outcomes are analysed and numerical study is given. Our analysis reveals that under certain conditions, blockchain integration can lead to reduced loan interest rates, lower wholesale prices, increased order quantities by buyers, and enhanced supply chain efficiency. Lastly, we develop a protocol to demonstrate the transfer of digital warehouse receipt on a permissioned blockchain to avoid fraudulent risk. This study provides a theoretical foundation, and a guidance for decisions-making in blockchain-enabled IPF schme.

Evaluative Analysis of the IFRS, its changes in the Financial Statements and Decision Making in the companies of Guayaquil - Ecuador, since Covid-19

The objective of this article is to identify and analyze the changes made to IFRS 3, 9, 10 and 16 since the beginning of COVID-19, and how these affect the presentation of financial statements, influencing decision-making. With the use of the deductive method and applying a qualitative approach, collecting information through the database of the Superintendency of Companies of Ecuador, an evaluative analysis of each company was carried out and how they applied the modifications offered by the IFRS, reviewing the financial statements of 60 companies in the Commercial, Real Estate and Financial sectors where it was obtained that 15% of these companies presented changes in their financial statements, of this percentage 8.3% belong to companies in the commercial sector, 5. 1% comes from entities in the real estate sector and 1.6% are from companies in the financial sector. It is concluded that there is no significant change in the presentation of financial information since COVID-19.

Implementing data-driven financial management systems in SMEs: A case review approach

The adoption of data-driven financial management systems has become increasingly vital for the growth and sustainability of small and medium-sized enterprises (SMEs). This review explores the implementation of such systems through a case review approach, analyzing their impact on financial decision-making, operational efficiency, and overall business performance. SMEs often face challenges in managing their financial processes due to limited resources, inefficient manual methods, and a lack of real-time data insights. Data-driven financial systems, leveraging automation, artificial intelligence (AI), and analytics, offer a solution by streamlining these processes, enhancing accuracy, and improving decision-making. The review examines three SMEs from different sectors manufacturing, retail, and services that have implemented data-driven financial systems. Through qualitative interviews, financial data analysis, and performance assessments before and after system implementation, the research identifies key improvements in cash flow management, profitability, and financial reporting. Each case highlights how automation and real-time data access have led to more strategic financial decisions, reduced costs, and operational efficiency. The findings suggest that data-driven financial systems not only increase financial transparency but also provide a competitive advantage by enabling SMEs to make informed decisions quickly. However, the review also identifies barriers to implementation, such as technical expertise, costs, and employee training, emphasizing the need for tailored solutions based on company size and sector. The review concludes by discussing future trends in financial technology adoption among SMEs and offers recommendations for facilitating successful integration. This research contributes to the understanding of how data-driven financial management can drive sustainable growth in SMEs. Keywords: Data-Driven, Financial Management, SMEs, Review.

The effect of weather on stock market returns: Evidence from African stock markets

Increasing market volatility and the profound impacts of climate change require a comprehensive understanding of how weather affects stock market performance. This paper aims to investigate the effect of eight weather conditions (clear sky, precipitation, pressure, temperature, relative humidity, specific humidity, wind direction, and wind speed) on the returns of major African stock markets (Botswana, Cote d’Ivoire, Kenya, Mauritius, Morocco, Namibia, Nigeria, Rwanda, South Africa, Tanzania, Tunisia, Uganda and Zambia) over the period from January 2, 1998 to December 30, 2023. Using daily data and a GJR-GARCH (1,1) model with an AR process, the findings reveal that weather conditions influence all African stock markets. Specifically, the markets are categorized according to their sensitivity to weather conditions into three groups: highly affected (5-7 coefficients with 0.001≤ p <0.05), moderately affected (3-4 coefficients with 0.001≤ p <0.05), and slightly affected (1-2 coefficients with 0.001≤ p <0.05). Mauritius and Uganda emerge as the most weather-sensitive countries, with significant impacts (0.001≤ p <0.05) for seven of the eight weather conditions studied. Understanding the relationship between weather conditions and African stock markets enables investors to adjust their strategies and better manage their portfolios to optimize return opportunities. Ultimately, this study provides essential insights for investors, portfolio managers, and financial decision-makers, aiding them in better assessing the risks and opportunities associated with weather conditions in African stock markets, thereby enhancing their decision-making and investment management.