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An Ordered Probit Approach for Exploring the Role of Self-Efficacy and Financial Literacy on Personal Finance Behavior

Author

Listed:
  • Sadraei , Mohammad Hosein

    (Sistan & Balouchestan University)

  • Aghababaei , Mohammad Ebrahim

    (Faculty of Financial Sciences, Kharazmi University)

Abstract

The present study investigates the impact of financial self-efficacy on personal finance behavior. To this end, the data collected from the questionnaire have been employed. Once the validity and reliability of the questionnaire are confirmed, the relation between financial self-efficacy and the likelihood of holding a specific financial product is studied using the multivariate Probit model. Products are subsequently categorized into two distinct groups based on the type of relationship. Afterward, the relation between financial self-efficacy and the likelihood of holding the number of products in each category is evaluated using the ordered Probit model. In this study, the cluster random sampling method is employed. The results are indicative of a negative and significant relationship between financial self-efficacy and the likelihood of holding bank facilities as well as a positive and significant relationship between financial self-efficacy and the likelihood of holding time deposits, Qarz Al-Hassaneh savings account, insurance, and corporate bonds and stocks. Furthermore, it is inferred that financial self-efficacy has a positive and significant impact on desirable financial behavior and a negative and significant impact on undesirable financial behavior.

Suggested Citation

  • Sadraei , Mohammad Hosein & Aghababaei , Mohammad Ebrahim, 2018. "An Ordered Probit Approach for Exploring the Role of Self-Efficacy and Financial Literacy on Personal Finance Behavior," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 13(2), pages 177-194, April.
    • Handle: RePEc:mbr:jmonec:v:13:y:2018:i:2:p:177-194
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    More about this item

    Keywords

    Financial Self- efficacy; Financial Behavior; Personal Finance;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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