IDEAS home Printed from https://ideas.repec.org/a/gam/jijfss/v8y2020i1p8-d318842.html
   My bibliography  Save this article

Determinants of Indebtedness: Influence of Behavioral and Demographic Factors

Author

Listed:
  • Mahfuzur Rahman

    (Faculty of Business & Accountancy, University Malaya, Kuala Lumpur 50603, Malaysia)

  • Nurul Azma

    (Institute for Advanced Studies, University Malaya, Kuala Lumpur 50603, Malaysia)

  • Md. Abdul Kaium Masud

    (Department of Business Administration, Noakhali Science and Technology University, Noakhali 3814, Bangladesh
    Department of Sustainability Management, Inha University, Incheon 22212, Korea)

  • Yusof Ismail

    (Kulliyyah of Economics and Management Sciences, IIUM Gombak Campus, Selangor 53100, Malaysia)

Abstract

This study aims to examine the influence of behavioral and demographic factors on indebtedness by constructing a model using specific determinants. The exploratory method is used through the partial least square (SmartPLS) technique, by surveying 320 respondents in Kuala Lumpur, Malaysia. A self-administered questionnaire was administered to respondents, addressing both demographic and behavioral factors. The results confirmed four of the eight hypotheses stated. Among the determinants, risk perception had a highly significant relationship with both materialism and emotion, while indebtedness had a relationship with emotion and materialism. The findings also indicated that significant differences exist between indebtedness and behavioral factors on the basis of gender, marital status, age, income, and dependence on credit cards and loans. The results may assist various economic players to design better models for credit offerings and address the credit problem in the long term.

Suggested Citation

  • Mahfuzur Rahman & Nurul Azma & Md. Abdul Kaium Masud & Yusof Ismail, 2020. "Determinants of Indebtedness: Influence of Behavioral and Demographic Factors," IJFS, MDPI, vol. 8(1), pages 1-14, February.
    • Handle: RePEc:gam:jijfss:v:8:y:2020:i:1:p:8-:d:318842
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7072/8/1/8/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7072/8/1/8/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Keese, Matthias, 2012. "Who feels constrained by high debt burdens? Subjective vs. objective measures of household debt," Journal of Economic Psychology, Elsevier, vol. 33(1), pages 125-141.
    2. Nurul Azma & Mahfuzur Rahman & Adewale Abideen Adeyemi & Muhammad Khalilur Rahman, 2019. "Propensity toward indebtedness: evidence from Malaysia," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 11(2), pages 188-200, June.
    3. Gregorio Caetano & Miguel Palacios & Harry A. Patrinos, 2019. "Measuring Aversion to Debt: An Experiment Among Student Loan Candidates," Journal of Family and Economic Issues, Springer, vol. 40(1), pages 117-131, March.
    4. Annamaria Lusardi & Olivia S Mitchelli, 2007. "Financial Literacy and Retirement Preparedness: Evidence and Implications for Financial Education," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 42(1), pages 35-44, January.
    5. Darriet, Elisa & Guille, Marianne & Vergnaud, Jean-Christophe & Shimizu, Mariko, 2020. "Money illusion, financial literacy and numeracy: Experimental evidence," Journal of Economic Psychology, Elsevier, vol. 76(C).
    6. Adriaan Kalwij & Rob Alessie & Milena Dinkova & Gea Schonewille & Anna van der Schors & Minou van der Werf, 2019. "The Effects of Financial Education on Financial Literacy and Savings Behavior: Evidence from a Controlled Field Experiment in Dutch Primary Schools," Journal of Consumer Affairs, Wiley Blackwell, vol. 53(3), pages 699-730, September.
    7. Siti Nurazira Mohd Daud & Ainulashikin Marzuki & Nursilah Ahmad & Zurina Kefeli, 2019. "Financial Vulnerability and Its Determinants: Survey Evidence from Malaysian Households," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(9), pages 1991-2003, July.
    8. Richins, Marsha L & Dawson, Scott, 1992. "A Consumer Values Orientation for Materialism and Its Measurement: Scale Development and Validation," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 19(3), pages 303-316, December.
    9. Annamaria Lusardi & Pierre-Carl Michaud & Olivia S. Mitchell, 2017. "Optimal Financial Knowledge and Wealth Inequality," Journal of Political Economy, University of Chicago Press, vol. 125(2), pages 431-477.
    10. Ottaviani, Cristina & Vandone, Daniela, 2011. "Impulsivity and household indebtedness: Evidence from real life," Journal of Economic Psychology, Elsevier, vol. 32(5), pages 754-761.
    11. Linh Nguyen & Gerry Gallery & Cameron Newton, 2019. "The joint influence of financial risk perception and risk tolerance on individual investment decision‐making," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 59(S1), pages 747-771, April.
    12. Norhana Endut & Toh Geok Hua, 2009. "Household debt in Malaysia," BIS Papers chapters, in: Bank for International Settlements (ed.), Household debt: implications for monetary policy and financial stability, volume 46, pages 107-116, Bank for International Settlements.
    13. Yiing Jia Loke, 2016. "Living beyond one’s means: evidence from Malaysia," International Journal of Social Economics, Emerald Group Publishing, vol. 43(1), pages 2-18, January.
    14. Richard Disney & John Gathergood, 2011. "Financial Literacy ad Indebtedness: New Evidence for UK Consumers," Discussion Papers 11/05, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    15. Fletschner, Diana & Mesbah, Dina, 2011. "Gender Disparity in Access to Information: Do Spouses Share What They Know?," World Development, Elsevier, vol. 39(8), pages 1422-1433, August.
    16. Gärling, Tommy & Kirchler, Erich & Lewis, Alan & van Raaij, Fred, 2009. "Psychology, Financial Decision Making, and Financial Crises," Sustainable Investment and Corporate Governance Working Papers 2009/7, Sustainable Investment Research Platform.
    17. Flores, Silvia Amélia Mendonça & Vieira, Kelmara Mendes, 2014. "Propensity toward indebtedness: An analysis using behavioral factors," Journal of Behavioral and Experimental Finance, Elsevier, vol. 3(C), pages 1-10.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Péricles Dias de Souza Júnior & Paulo Vitor Jordão da Gama Silva, 2024. "Personality, Risk and Financial Planning: A Consigned Credit Analysis," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 14(2), pages 1-5.
    2. Mikaela Daiane Prestes Floriano & Andressa Hennig Silva, 2023. "Understanding Conspicuity in the Dissemination of Experiences on Social Media: The Effect of Materialism," RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration), ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração, vol. 27(Vol. 27 N), pages 220323-2203.
    3. Paravee Maneejuk & Sopanid Teerachai & Atinuch Ratchakit & Woraphon Yamaka, 2021. "Analysis of Difference in Household Debt across Regions of Thailand," Sustainability, MDPI, vol. 13(21), pages 1-24, November.
    4. Łukasz Kurowski, 2021. "Household’s Overindebtedness during the COVID-19 Crisis: The Role of Debt and Financial Literacy," Risks, MDPI, vol. 9(4), pages 1-19, March.
    5. Lebdaoui, Hind & Chetioui, Youssef, 2021. "Antecedents of consumer indebtedness in a majority-Muslim country: Assessing the moderating effects of gender and religiosity using PLS-MGA," Journal of Behavioral and Experimental Finance, Elsevier, vol. 29(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lebdaoui, Hind & Chetioui, Youssef, 2021. "Antecedents of consumer indebtedness in a majority-Muslim country: Assessing the moderating effects of gender and religiosity using PLS-MGA," Journal of Behavioral and Experimental Finance, Elsevier, vol. 29(C).
    2. Aswathi Rebecca Asok & Joe Cox, 2024. "Debt Attitude and Debt Accumulation among Rural Poor Households in a Developing Region: A Q-squared Approach," Working Papers in Economics & Finance 2024-03, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    3. Agarwalla, Sobhesh Kumar & Barua, Samir K. & Jacob, Joshy & Varma, Jayanth R., 2015. "Financial Literacy among Working Young in Urban India," World Development, Elsevier, vol. 67(C), pages 101-109.
    4. Łukasz Kurowski, 2021. "Household’s Overindebtedness during the COVID-19 Crisis: The Role of Debt and Financial Literacy," Risks, MDPI, vol. 9(4), pages 1-19, March.
    5. Delgado Fuentealba, Carlos L. & Muñoz Mendoza, Jorge A. & Sepúlveda Yelpo, Sandra M. & Veloso Ramos, Carmen L. & Fuentes-Solís, Rodrigo A., 2021. "Household debt, automatic bill payments and inattention: Theory and evidence," Journal of Economic Psychology, Elsevier, vol. 85(C).
    6. Azra Zaimovic & Anes Torlakovic & Almira Arnaut-Berilo & Tarik Zaimovic & Lejla Dedovic & Minela Nuhic Meskovic, 2023. "Mapping Financial Literacy: A Systematic Literature Review of Determinants and Recent Trends," Sustainability, MDPI, vol. 15(12), pages 1-30, June.
    7. Hero Ashman & Seth Neumuller, 2020. "Can Income Differences Explain the Racial Wealth Gap: A Quantitative Analysis," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 35, pages 220-239, January.
    8. M. Fort & F. Manaresi & S. Trucchi, 2012. "Banks Information Policies, Financial Literacy and Household Wealth," Working Papers wp852, Dipartimento Scienze Economiche, Universita' di Bologna.
    9. M. Martin Boyer & Philippe d’Astous & Pierre-Carl Michaud, 2019. "Tax-Sheltered Retirement Accounts: Can Financial Education Improve Decisions?," Cahiers de recherche 1902, Chaire de recherche Industrielle Alliance sur les enjeux économiques des changements démographiques.
    10. Marco FRIGERIO & Cristina OTTAVIANI & Daniela VANDONE, 2018. "A Meta-Analytic Investigation of Consumer Over-Indebtedness: the Role of Impulsivity," Departmental Working Papers 2018-08, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    11. Sholevar, Maryam & Harris, Laurence, 2019. "Mind the gap: A discussion paper on Financial Literacy, Financial behaviour and Financial Education : Is there any Gender Gap?," OSF Preprints b7zd6, Center for Open Science.
    12. Asli Elif Aydin, 2022. "Psychological and demographic factors influencing responsible credit card debt payment," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 27(1), pages 17-26, March.
    13. Manuel Salas‐Velasco & Dolores Moreno‐Herrero & José Sánchez‐Campillo, 2021. "Teaching financial education in schools and students' financial literacy: A cross‐country analysis with PISA data," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 4077-4103, July.
    14. Milena Dinkova & Adriaan Kalwij & Rob Alessie, 2021. "Know More, Spend More? The Impact of Financial Literacy on Household Consumption," De Economist, Springer, vol. 169(4), pages 469-498, November.
    15. Lührmann, Melanie & Serra-Garcia, Marta & Winter, Joachim, 2015. "Teaching teenagers in finance: Does it work?," Journal of Banking & Finance, Elsevier, vol. 54(C), pages 160-174.
    16. Leiser, David & Benita, Rinat & Bourgeois-Gironde, Sacha, 2016. "Differing conceptions of the causes of the economic crisis: Effects of culture, economic training, and personal impact," Journal of Economic Psychology, Elsevier, vol. 53(C), pages 154-163.
    17. Atte Oksanen & Mikko Aaltonen & Kati Rantala, 2015. "Social Determinants of Debt Problems in a Nordic Welfare State: a Finnish Register-Based Study," Journal of Consumer Policy, Springer, vol. 38(3), pages 229-246, September.
    18. John Gathergood & Jörg Weber, 2012. "Self-control, Financial Literacy and the Co-holding Puzzle," Discussion Papers 12/04, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    19. Dick, Christian D. & Jaroszek, Lena M., 2013. "Knowing what not to do: Financial literacy and consumer credit choices," ZEW Discussion Papers 13-027, ZEW - Leibniz Centre for European Economic Research.
    20. Fanny Salignac & Julien Hanoteau & Ioana Ramia, 2022. "Financial Resilience: A Way Forward Towards Economic Development in Developing Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 160(1), pages 1-33, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jijfss:v:8:y:2020:i:1:p:8-:d:318842. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.