The nexus between financial literacy, risk perception and investment decisions: Evidence from Indonesian investors
Financial literacy is an essential factor for individuals or households in making investment decisions. However, the problem of insufficient financial literacy is still considered one of the factors limiting the creation of successful investments, especially in relation to risk perception. Some inve...
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LLC "CPC "Business Perspectives"
2024-08-01
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| Series: | Investment Management & Financial Innovations |
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| Online Access: | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/20515/IMFI_2024_03_Wendy.pdf |
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| author | Wendy Wendy |
| author_facet | Wendy Wendy |
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| description | Financial literacy is an essential factor for individuals or households in making investment decisions. However, the problem of insufficient financial literacy is still considered one of the factors limiting the creation of successful investments, especially in relation to risk perception. Some investors have financial losses due to their limited financial literacy, making inefficient investment decisions and implicating high-risk investment choices. Hence, this study aims to explore the interconnection between financial literacy, risk perception and investment decisions. Moderated regression analysis was used for 233 investors in Indonesia who completed financial management training. The results showed that financial literacy has a positive and significant impact on investment decisions, which means that it could be used to improve the quality of investment decisions. On the other hand, risk perception as a moderating variable weakened the impact of financial literacy on investment decisions; this confirmed the consistent results before and after financial training. Overall, financial literacy across three dimensions (knowledge, skills, and attitude) plays an important role in investors allocating more funds to investment instruments than respondent groups with lower financial literacy levels. In addition, the level of financial literacy also influences the choice of investment product. |
| format | Article |
| id | doaj-art-81d804f5303c450996746ab5a4df2f8e |
| institution | Kabale University |
| issn | 1810-4967 1812-9358 |
| language | English |
| publishDate | 2024-08-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Investment Management & Financial Innovations |
| spelling | doaj-art-81d804f5303c450996746ab5a4df2f8e2025-02-03T10:33:50ZengLLC "CPC "Business Perspectives"Investment Management & Financial Innovations1810-49671812-93582024-08-0121313514710.21511/imfi.21(3).2024.1220515The nexus between financial literacy, risk perception and investment decisions: Evidence from Indonesian investorsWendy Wendy0https://orcid.org/0000-0002-2046-9813Associate Professor, Dr., Department of Management, Faculty of Economics and Business, Tanjungpura University, IndonesiaFinancial literacy is an essential factor for individuals or households in making investment decisions. However, the problem of insufficient financial literacy is still considered one of the factors limiting the creation of successful investments, especially in relation to risk perception. Some investors have financial losses due to their limited financial literacy, making inefficient investment decisions and implicating high-risk investment choices. Hence, this study aims to explore the interconnection between financial literacy, risk perception and investment decisions. Moderated regression analysis was used for 233 investors in Indonesia who completed financial management training. The results showed that financial literacy has a positive and significant impact on investment decisions, which means that it could be used to improve the quality of investment decisions. On the other hand, risk perception as a moderating variable weakened the impact of financial literacy on investment decisions; this confirmed the consistent results before and after financial training. Overall, financial literacy across three dimensions (knowledge, skills, and attitude) plays an important role in investors allocating more funds to investment instruments than respondent groups with lower financial literacy levels. In addition, the level of financial literacy also influences the choice of investment product.https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/20515/IMFI_2024_03_Wendy.pdffinanceinvestment decisionknowledgeliteracyrisk perception |
| spellingShingle | Wendy Wendy The nexus between financial literacy, risk perception and investment decisions: Evidence from Indonesian investors Investment Management & Financial Innovations finance investment decision knowledge literacy risk perception |
| title | The nexus between financial literacy, risk perception and investment decisions: Evidence from Indonesian investors |
| title_full | The nexus between financial literacy, risk perception and investment decisions: Evidence from Indonesian investors |
| title_fullStr | The nexus between financial literacy, risk perception and investment decisions: Evidence from Indonesian investors |
| title_full_unstemmed | The nexus between financial literacy, risk perception and investment decisions: Evidence from Indonesian investors |
| title_short | The nexus between financial literacy, risk perception and investment decisions: Evidence from Indonesian investors |
| title_sort | nexus between financial literacy risk perception and investment decisions evidence from indonesian investors |
| topic | finance investment decision knowledge literacy risk perception |
| url | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/20515/IMFI_2024_03_Wendy.pdf |
| work_keys_str_mv | AT wendywendy thenexusbetweenfinancialliteracyriskperceptionandinvestmentdecisionsevidencefromindonesianinvestors AT wendywendy nexusbetweenfinancialliteracyriskperceptionandinvestmentdecisionsevidencefromindonesianinvestors |