Effects of Perceived Scarcity on Financial Decision Making

2018 ◽  
Vol 37 (1) ◽  
pp. 68-87 ◽  
Author(s):  
Laurel Aynne Cook ◽  
Raika Sadeghein
Keyword(s):  
Decision Making ◽  
Financial Risk ◽  
Qualitative Data ◽  
Future Research ◽  
Policy Makers ◽  
Welfare Impact ◽  
Financial Decisions ◽  
Financial Decision ◽  
Influence Perceptions ◽  
Method Approach

How are financial decisions compromised as scarcity increases? Extant research focuses mostly on the consequences of financial scarcity; moreover, this factor is treated simply as a lack of liquidity. Using a mixed-method approach, the authors investigate the dimensions of perceived scarcity and the ways they work in tandem to negatively influence perceptions and decisions. Internal influences (including perceived consequences) and external influences (including decreased lending options) lead to results described in this article as the “triple scarcity effect.” Experimental results show how perceived financial scarcity undermines loan decisions, particularly for consumers at the greatest financial risk. Next, qualitative data collected from the Consumer Financial Protection Bureau are used for a between-method triangulation of the earlier findings. Understanding the multidimensionality of perceived financial scarcity is important for designing preventive measures that improve decisions (e.g., not reborrowing) and decision making (e.g., accurately calculating cost). Results from two interventions demonstrate how these improvements are made when consumers' perceptions of scarcity are reduced. Finally, the authors discuss the welfare impact for lenders, marketers, and policy makers, and they offer an agenda for future research.

Review of Family Financial Decision Making: Suggestions for Future Research and Implications for Financial Education

2017 ◽  
Vol 28 (2) ◽  
pp. 253-267 ◽  
Author(s):  
Jinhee Kim ◽  
Michael S. Gutter ◽  
Taylor Spangler
Keyword(s):  
Decision Making ◽  
Decision Process ◽  
Family System ◽  
Financial Education ◽  
Future Research ◽  
Financial Decisions ◽  
Individual Level ◽  
Financial Decision Making ◽  
Financial Decision ◽  
The Individual

This article reviews the theories and literature in intrahousehold financial decisions, spousal partners and financial decision making, family system and financial decision process, children, and financial decisions. The article draws conclusions from the literature review and discusses directions for future research and educational programs. Most financial education and counseling takes place at the individual level, whereas financial decisions take place at household and intrahousehold levels. Family members, spouses/partners, children, and others play a key role in individuals’ financial decisions. The article proposes the key programmatic implications for financial professionals and educators that need to be integrated into financial education and counseling. Understanding the unique dynamics of family financial decision making would help create effective educational and counseling strategies for the whole families.

scholarly journals Social Comparisons are Associated with Poorer and Riskier Financial Decision Making, no Matter whether Encounters are Sporadic or Repeated

2016 ◽  
Vol 19 ◽  
Author(s):  
Alfonso Barrós-Loscertales ◽  
Antonio M. Espín ◽  
José C. Perales
Keyword(s):  
Decision Making ◽  
Social Interaction ◽  
Financial Risk ◽  
Social Comparisons ◽  
Social Conditions ◽  
Financial Decisions ◽  
The Social ◽  
Binary Choices ◽  
Social Encounters ◽  
Financial Decision

AbstractPrevious research suggests that social comparisons affect decision making under uncertainty. However, the role of the length of the social interaction for this relationship remains unknown. This experiment tests the effect of social comparisons on financial risk taking and how this effect is modulated by whether social encounters are sporadic or repeated. Participants carried out a computer task consisting of a series of binary choices between lotteries of varying profitability and risk, with real monetary stakes. After each decision, participants could compare their own payoff to that of a counterpart who made the same decision at the same time and whose choices/earnings did not affect the participants’ earnings. The design comprised three between-subjects treatments which differed in the nature of the social interaction: participants were informed that they would be matched with either (a) a different participant in each trial, (b) the same participant across all trials, or (c) a “virtual participant”, i.e., a computer algorithm. Compared to the non-social condition (c), subjects in both social conditions (a and b) chose lotteries with lower expected value (z = –3.10, p < .01) and higher outcome variance (z = 2.13, p = .03). However, no differences were found between the two social conditions (z = 1.15, p = .25 and z = 0.35, p = .73, respectively). These results indicate that social comparison information per se leads to poorer and riskier financial decisions, irrespective of whether or not the referent other is encountered repeatedly.

scholarly journals Peer effects, Financial Decisions and Industry Concentration

2019 ◽  
Vol 2 (2) ◽  
pp. 13-21
Author(s):  
Isma Zaighum ◽  
Dr. Mohd Zaini Abd Karim
Keyword(s):  
Decision Making ◽  
Content Analysis ◽  
Peer Effects ◽  
Industry Concentration ◽  
Future Research ◽  
Special Focus ◽  
Financial Decisions ◽  
Financial Decision Making ◽  
Competitive Environments ◽  
Financial Decision

Purpose- This article reviews literature related to peer effects and different financial decisions. It further summarizes the theory and motives that drive peer effects. Also, the study highlights the influence of industry concentration on peer interaction in financial decision making. This content analysis of scantily available peer effect literature has been performed to highlight the significance of peer effects in financial decision making like investment, cash holding, leverage and many more. Most of the existing peer effects literature focuses on the U.S. However, peer effects also occur in other countries but empirical evidence is comparatively limited. But, managers may take into consideration their industry peers especially if their firms are operating in highly competitive environments.  Design/Methodology- Content analysis approach is applied to review prevailing financial literature on peer interactions and financial decisions with a special focus on industry concentration in explaining the peer effects.  Practical Implications- As the prime focus of managerial decisions is to maximize the firm’s value. Hence, information about peers would be helpful in making better decisions, especially in highly competitive environments. Also, this review of selected literature provides pathways for future research in investigating the motives of peer effects.

The financial decisions of family businesses

2017 ◽  
Vol 7 (3) ◽  
pp. 351-373 ◽  
Author(s):  
Anna Motylska-Kuzma
Keyword(s):  
Decision Making ◽  
Family Business ◽  
Family Firms ◽  
Family Businesses ◽  
Future Research ◽  
Content Type ◽  
Financial Decisions ◽  
Financial Decision Making ◽  
The Family ◽  
Financial Decision

Purpose The purpose of this paper is to examine the status, trends and potential future research areas in the field of financial decision-making process in family firms. Design/methodology/approach The bibliometric indicators and methods are applied in order to describe the publication activity and to analyze the contents of the articles. The material examined are the journals included in the SCOPUS, SAGE and EBSCO database and the peer-reviewed article, which contain in their titles, keywords or abstracts with a combination of phrases “family firms,” “family business” or “family enterprise” with “financial decision” or one of the subcategories: capital structure, investment decision, capital budgeting, working capital management or dividend policy. The study covers the period from 2000 to 2016. Findings Although the interest in family business research is growing rapidly, the area of financial decision making is underestimated. Despite of the fact that the vast majority of the studies into financial decisions in family firms is are focused on the capital structure, they do not give clear answers to the question of how the family businesses behave in this scope and what their true financial logic is. Additionally, the area of the investment decisions and dividend policy is rather not better left uncovered. Research limitations/implications The analyses enable the identification of potential avenues for future research which could be vital to make an advancement in the consolidation of the discipline. Practical implications The analyses ought to have a potential meaning mainly for external institutions (especially financial institutions) in better understanding of the family businesses and their point of view. Originality/value This paper fulfills the need of a comprehensive review of financial decision making process in family firms. It provides a literature review and bibliography for the period between 2000 and 2016 for the use of both academicians and practitioners.

scholarly journals Impact of financial statements for financial decision-making

2020 ◽  
Vol 5 (2) ◽  
Author(s):  
Saddeq Abdulshakour
Keyword(s):  
Decision Making ◽  
Relative Weight ◽  
Financial Statements ◽  
Decision Makers ◽  
Financial Statement ◽  
Financial Decisions ◽  
Financial Decision Making ◽  
Vision 2030 ◽  
Study Population ◽  
Financial Decision

The study aimed to know the effects of analysis of financial statements on financial decisions, and the degree of benefit from them, and to identify what financial statements, what is its importance for the institutions within the framework of the Kingdom's Vision 2030 of ideas and trends, and to identify the contribution of financial statement analysis to financial decision-making. The study was based on the descriptive and analytical approach, and the study population consisted of all financial decision makers. The study was based on a simple random method (70) of financial decision makers. The study was based on the questionnaire and consisted of the following axes (financial statements in companies, financial decision-making, the effects of analysis of financial statements on financial decision-making). The study came out with a number of results, the most important of which are: There is approval by the respondents to all paragraphs of the first axis "financial statements in companies", with a relative weight of 82.8%. There is an agreement by the respondents on all paragraphs of the second axis "making financial decisions in companies", with a relative weight of 81.3%. There is strong approval by the respondents on all paragraphs of the third axis "the effects of analysis of financial statements on financial decision-making", with a relative weight of 86.4%. The financial statements are a key tool to know the financial position of the company, so they must be accurate and reliable before being published by management. The lack of credibility in the financial statements leads to mistrust in the company by investors, and does not give them the possibility to diagnose and make sound decisions. In light of the previous results, the study recommended the following: • Organizing several forums, conferences and forums to clarify the mechanism of preparing the financial statements and how to analyze them, and the need to raise awareness of financial decision makers about the importance of financial statements in the financial decision-making process.

scholarly journals Gender Differences in Financial Decisions

2018 ◽  
Vol 11 (1) ◽  
pp. 21-27
Author(s):  
Jeetendra Dangol
Keyword(s):  
Gender Differences ◽  
Decision Making ◽  
Financial Literacy ◽  
Sampling Technique ◽  
Financial Decisions ◽  
Financial Decision Making ◽  
Financial Decision ◽  
Convenience Sampling ◽  
Risk Taker ◽  
Survey Questionnaires

This paper examines the gender differences in financial decision-making of university students who are young, single, childless individuals that have at least average financial literacy and very small or no income. This paper is based on the survey questionnaires developed by Grable and Lytton (2003), distributed and collected from 100 students (50 men and 50 women) by using convenience sampling technique. The study finds that men and women differ in their financial decision. Women are less risk taker than men in financial decision-making; it indicates that women prefer to safer investment.

scholarly journals FINANCIAL DECISION MAKING SELF-EFFICACY IN COGNITIVELY AND FINANCIALLY VULNERABLE OLDER ADULTS

2019 ◽  
Vol 3 (Supplement_1) ◽  
pp. S477-S478
Author(s):  
Evan Z Gross ◽  
Rebecca J Campbell ◽  
LaToya Hall ◽  
Peter Lichtenberg
Keyword(s):  
Alzheimer’S Disease ◽  
Older Adults ◽  
Alzheimer's Disease ◽  
Decision Making ◽  
Cognitive Impairment ◽  
Self Efficacy ◽  
Clinical Samples ◽  
Financial Decisions ◽  
Financial Decision Making ◽  
Financial Decision

Abstract Financial decision making self-efficacy (FDMSE) is a novel construct that may influence how older adults make financial decisions. Our previous research with a community sample of older adults demonstrated that cognitive functioning and suspected history of financial exploitation were both associated with low FDMSE. We sought to replicate these findings in two clinical samples of older adults: people with mild cognitive impairment (MCI) or probable Alzheimer’s disease (PAD) and current victims of scams or exploitation as determined by a financial coach. Samples were obtained from the Michigan Alzheimer’s Disease Center and a financial coaching intervention study. All participants completed a 4-item FDMSE measure. One-way ANOVAs, t-tests and chi-square tests were conducted to test for group differences with controls on demographics. There was a main effect of cognitive status on FDMSE, F(2,138) = 8.10, p &lt; .001, which was driven by higher FDMSE in the healthy group (N = 63) than the MCI (N = 76) or PAD (N = 28) groups. Similarly, scam victims (N = 25) had significantly lower FDMSE than non-exploited (N = 25) peers, t(48)=2.33, p &lt; 05. Cognitive impairment and current financial scams are both associated with low FDMSE levels. Low FDMSE may exacerbate cognitive and psychosocial vulnerabilities that contribute to risk for poor financial decisions among older adults. Future interventions to enhance FDMSE may help older adults make better decisions despite changes in thinking abilities or previous negative financial experiences.

scholarly journals The Problems of Budgeting and Financial Decision Process

Ekonomika ◽  
2004 ◽  
Vol 67 ◽  
Author(s):  
Jan Vávra
Keyword(s):  
Decision Making ◽  
Decision Process ◽  
Current Practice ◽  
Financial Decisions ◽  
Financial Decision Making ◽  
Advantages And Disadvantages ◽  
Annual Budget ◽  
Special Software ◽  
Financial Decision ◽  
Budgeting Process

Many companies recognize that the traditional annual budget (produced near yearend and then used as a guide for the following year even though it is out of date) is just not good enough. Instead, they are turning to alternative budgets (forecasts) that are updated every few months. They impose new requirements on financial decision-making. Management must access and process information more quickly, and this often means a change of the current practice of data collection and processing or even acquiring special software to do the job. The budgeting process and financial decisions can be accelerated and improved in several ways, and the paper deals with advantages and disadvantages of the possible ways.

scholarly journals Relationship between Students’ Involvement in Decision-Making and Academic Performance in Public Secondary Schools of Kenya

2021 ◽  
Vol 1 (2) ◽  
pp. p1
Author(s):  
Justus B. Maende
Keyword(s):  
Decision Making ◽  
Regression Analysis ◽  
Academic Performance ◽  
Secondary School Principals ◽  
Simple Random Sampling ◽  
Future Research ◽  
Validity And Reliability ◽  
Policy Makers ◽  
Baseline Information ◽  
Level Of Significance

Secondary school principals play a key role in decision-making leading to students’ academic performance. There was a decline in the percentage of the examination candidates from Kakamega County who were selected to join public universities from the year 2011 to 2015. This study intended to establish the relationship between students’ involvement in decision-making by principals and academic performance. Respondents were sampled by simple random sampling. Pre-testing of instruments of data collection was undertaken to ensure validity and reliability of the instruments. Data was collected from 36 principals, 199 teachers and 393 Form 4 students by use of questionnaire and interview schedule. Research experts determined validity of the instruments. Data was analyzed using descriptive statistics, frequencies, percentages, means, cross tabulation and Pearson’s correlation. Hypotheses were tested through regression analysis at 0.05 level of significance. Regression analysis revealed that students’ involvement in decision-making explained 24.6%, and of the variation in academic performance. Leadership functions such as students allowed to elect prefects, prefects attending staff/BoM meetings. It was recommended that principals should involve students in decision making. This study would be significant to policy makers, principals, teachers and other education stakeholders in Kenya. The study would also form baseline information for future research.

Sign in / Sign up

Export Citation Format

Share Document