The Effect of Emotional Finance, along with Investors Protection, Fee, Risk, and Past Performance, on the Investment Decision in Islamic Mutual Funds of Pakistan: The Complementary Role of Market Knowledge and Religiosity

The study intended to examine the effects of investor protection, emotional finance (including factors like anxiety, optimism, and happiness), fee (price value), perceived risk, and past performance (performance expectation) on actual use behavior through the mediating role of behavioral intention in Islamic mutual funds in Pakistan. It also explores the moderating effects of market knowledge and religiosity on the relationship between these factors. The study targeted Islamic mutual fund consumers in Karachi, collecting 303 responses via purposive sampling and analyzed the data using PLS-SEM. The results have shown that anxiety, happiness, investor protection, and optimism positively influence emotional finance and behavioral intention, while perceived risk negatively impacts behavioral intention. Fee (price value) has an insignificant negative effect. Behavioral intention significantly mediates investor protection, past performance, and actual use behavior but shows insignificant mediation for emotional finance. Market knowledge negatively moderates perceived risk and emotional finance, while religiosity positively moderates fee (price value) and past performance. Other effects are insignificant. The study has recommended that managers should focus on strengthening investor protection, and mitigating perceived risks to boost behavioral intention and actual use of Islamic mutual funds. This study enriches the understanding of how emotional and cognitive factors, along with market knowledge and religiosity, shape investor behavior in Islamic mutual funds, offering valuable insights for both theory and practice.