IMPACT OF FINANCIAL LITERACY ON INVESTORS: A SYSTEMATIC LITERATURE REVIEW USING PRISMA PROTOCOL
Keywords:
Financial Literacy, Investment, Investors, PRISMA, Systematic Literature Review, Financial Management.
Abstract
Financial literacy is the potential to understand and productively use different financial skills such as managing finance, budgeting and investing. FL has been considered one of the most important factors to improve the growth of investors and the economy as a whole. This study’s main purpose is to present a Systematic Literature Review (SLR) on FL and Investment between 2012 and 2021. The Systematic Literature Review analysis has been performed based on the PRISMA to analyse 26 related articles obtained from the Web of Science, Taylor and Francis and Jstor database. The review of the paper has been categorised based on publication year, a journal list, publication by authors number, features of review articles, tools and techniques applied, variables, findings and practical implications and outcomes of the area of study. The outcomes of this paper provide an understanding of the publication criteria of financial literacy and investment along with that it also offers possible approaches for further publications. The findings of the study also analyse the impact of financial literacy on investors. The study will provide an in-depth understanding of the concepts of Financial Literacy. The study suggests that future researchers initiate further research on financial literacy and investment and also diversify the broader study period. This paper is the first of its kind to identify the impact of investment preference on investors.
JEL Classification Codes: G50, G51, G52, G53.
References
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Giofré, M. (2017). Financial education, investor protection and international portfolio diversification. Journal of international money and finance, 71, 111-139. https://doi.org/10.1016/j.jimonfin.2016.11.004
Graña-Alvarez, R., Lopez-Valeiras, E., Gonzalez-Loureiro, M., & Coronado, F. (2022). Financial literacy in SMEs: A systematic literature review and a framework for further inquiry. Journal of Small Business Management, 1-50. https://doi.org/10.1080/00472778.2022.2051176
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Jappelli, T., & Padula, M. (2015). Investment in financial literacy, social security, and portfolio choice. Journal of Pension Economics and Finance, 14, 369–411. https://doi.org/10.1017/S1474747214000377
Jin, J., Kanagaretnam, K., Liu, Y.I., & Cheng, M. (2021). Does Citizens’ Financial Literacy Relate to Bank Financial Reporting Transparency? European Accounting Review, 30, 887–912. https://doi.org/10.1080/09638180.2021.1965897
Kim, D. (2015). Depositor Runs and Financial Literacy.
Kramer, M. M. (2016). Financial literacy, confidence and financial advice seeking. Journal of Economic Behavior & Organization, 131, 198-217. https://doi.org/10.1016/j.jebo.2016.08.016
Lachance, M. E. (2014). Financial literacy and neighborhood effects. Journal of Consumer Affairs, 48(2), 251-273.
Lusardi, A., & Mitchell, O. S. (2014). The economic importance of financial literacy: Theory and evidence. American Economic Journal: Journal of Economic Literature, 52(1), 5-44. https://doi.org/10.1257/jel.52.1.5
Lusardi, A., Mitchell, O.S., Alesina, A., Alessie, R., Botticini, M., Campbell, J., Caplin, A., Chan, S., Engelhardt, G., Gustman, A., Hurd, M., Kapteyn, A., Mastrogiacomo, M., Ofstedal, M.B., Rodgers, W., Snyder, C., van Rooij, M., van Soest, A., Helpful, S.U., Washington, G., 2011. NBER WORKING PAPER SERIES FINANCIAL LITERACY AND PLANNING: IMPLICATIONS FOR RETIREMENT WELLBEING Financial Literacy and Planning: Implications for Retirement Wellbeing.
Mehboob, F., & Othman, N. (2020). Examining the links leading to behavioral support for change: An expectancy theory perspective. International Journal of Social Sciences and Economic Review, 2(4), 1-08. https://doi.org/10.36923/ijsser.v2i4.78
Meier, S., & Sprenger, C.D. (2013). Discounting financial literacy: Time preferences and participation in financial education programs. Journal of Economic Behavior and Organization 95, 159–174. https://doi.org/10.1016/j.jebo.2012.02.024
Moher, D., Liberati, A., Tetzlaff, J., Altman, D. G., & PRISMA Group*, T. (2009). Preferred reporting items for systematic reviews and meta-analyses: the PRISMA statement. Annals of internal medicine, 151(4), 264-269. https://doi.org/10.1136/bmj.b2535
Moreno-Montes De Oca, I., Snoeck, M., Reijers, H.A., Rodríguez-Morffi, A., 2015. A systematic literature review of studies on business process modeling quality. Information and software technology, 58, 187-205.https://doi.org/10.1016/j.infsof.2014.07.011
Mudzingiri, C., Muteba Mwamba, J.W., & Keyser, J.N. (2018). Financial behavior, confidence, risk preferences and financial literacy of university students. Cogent Economics and Finance, 6, 1–25. https://doi.org/10.1080/23322039.2018.1512366
Murugiah, L. (2016). The level of understanding and strategies to enhance financial literacy among Malaysian. International Journal of Economics and Financial Issues, 6(3), 130-139.
Nguyen, T.A.N., Nguyen, K.M., 2020. Role of financial literacy and peer effect in promotion of financial market participation: Empirical evidence in Vietnam. Journal of Asian Finance, Economics and Business 7, 1–8. https://doi.org/10.13106/JAFEB.2020.VOL7.NO6.001
Noor, N., Batool, I., & Arshad, H. M. (2020). Financial literacy, financial self-efficacy and financial account ownership behavior in Pakistan. Cogent Economics & Finance, 8(1), 1806479. https://doi.org/10.1080/23322039.2020.1806479
Okello Candiya Bongomin, G., Munene, J. C., & Yourougou, P. (2020). Examining the role of financial intermediaries in promoting financial literacy and financial inclusion among the poor in developing countries: Lessons from rural Uganda. Cogent Economics & Finance, 8(1), 1761274. https://doi.org/10.1080/23322039.2020.1761274
Organisation for Economic Co-operation and Development., 2013. PISA 2012 assessment and analytical framework: mathematics, reading, science, problem-solving and financial literacy. OECD.
Pahlevan-Sharif, S., Mura, P., & Wijesinghe, S. N. (2019). A systematic review of systematic reviews in tourism. Journal of Hospitality and Tourism Management, 39, 158-165. https://doi.org/10.1016/j.jhtm.2019.04.001
Pangestu, S., & Karnadi, E. B. (2020). The effects of financial literacy and materialism on the savings decision of generation Z Indonesians. Cogent Business & Management, 7(1), 1743618. https://doi.org/10.1080/23311975.2020.1743618
Rahadi, R. A., Danella, J., & Okdinawati, L. (2019). The Correlation between Financial Literacy and Family Wealth Distribution in Bandung. European Journal of Business and Management Research, 4(2). https://doi.org/10.24018/ejbmr.2019.4.2.34
Reddy, K. S., & Mahapatra, M. S. (2017). Risk tolerance, personal financial knowledge and demographic characteristics-evidence from India. The Journal of Developing Areas, 51(3), 51-62. https://doi.org/10.2307/26416932
Stålnacke, O. (2019). Individual investors’ information use, subjective expectations, and portfolio risk and return. The European Journal of Finance, 25(15), 1351-1376. https://doi.org/10.1080/1351847X.2019.1592769
Tranfield, D., Denyer, D., & Smart, P. (2003). Towards a methodology for developing evidence‐informed management knowledge by means of systematic review. British journal of management, 14(3), 207-222.
Vaarmets, T., Liivamägi, K., & Talpsepp, T. (2019). How does learning and education help to overcome the disposition effect?. Review of Finance, 23(4), 801-830. https://doi.org/10.1093/rof/rfy006
Van Rooij, M. C., Lusardi, A., & Alessie, R. J. (2012). Financial literacy, retirement planning and household wealth. The Economic Journal, 122(560), 449-478.
Ahmad, I., & Ahmad, S. (2018). Multiple skills and medium enterprises’ performance in Punjab Pakistan: A pilot study. The Journal of Social Sciences Research, Special, (4), 44-49. https://doi.org/10.32861/jssr.spi4.44.49
Ahmad, I., & bin Ahmad, S. (2019). The Mediation Effect of Strategic Planning on the Relationship between Business Skills and Firm’s Performance: Evidence from Medium Enterprises in Punjab, Pakistan. Año 35, Regular No 24, 746–778.
Azmi, N. F., Mohamad, S. R., Hasan, H., Deraman, S. N. S., Abdullah, T., Abdullah, S. S., & Hashim, N. A. A. N. (2020). Analysis of the Relation between Financial Literacy and Entrepreneur. International Journal of Engineering Research and Technology.
Bianchi, M. (2018). Financial Literacy and Portfolio Dynamics. Journal of Finance, 73, 831–859. https://doi.org/10.1111/jofi.12605
Brau, J.C., Holmes, A.L., & Israelsen, C.L. (2019). Financial Education Association Financial Literacy among College Students. Journal of Financial Education, 45, 179–205. https://doi.org/10.2307/48632887
Briner, R.B., & Denyer, D. (2012). Systematic Review and Evidence Synthesis as a Practice and Scholarship Tool, in: The Oxford Handbook of Evidence-Based Management. Oxford University Press. https://doi.org/10.1093/oxfordhb/9780199763986.013.0007
Calcagno, R., Giofré, M., & Urzì-Brancati, M.C. (2017). To trust is good, but to control is better: How investors discipline financial advisors’ activity. Journal of Economic Behavior and Organization, 140, 287–316. https://doi.org/10.1016/j.jebo.2017.04.010
Carmel, E., Carmel, D., Leiser, D., & Spivak, A. (2015). Facing a biased adviser while choosing a retirement plan: The impact of financial literacy and fair disclosure. Journal of consumer affairs, 49(3), 576-595.
Çera, G., Khan, K.A., Mlouk, A., & Brabenec, T., (2021). Improving financial capability: the mediating role of financial behaviour. Economic Research-Ekonomska Istrazivanja, 34, 1265–1282. https://doi.org/10.1080/1331677X.2020.1820362
Clark, R., Lusardi, A., & Mitchell, O.S. (2017). Financial knowledge and 401(k) investment performance: A case study. Journal of Pension Economics and Finance, 16, 324–347. https://doi.org/10.1017/S1474747215000384
da Silva, P. P., Mendes, V., & Abreu, M. (2022). The disposition effect among mutual fund participants: a re-examination. The European Journal of Finance, 28(12), 1237-1256.
Davydov, D., Khrashchevskyi, I., & Peltomäki, J. (2021). Investor attention and portfolio performance: what information does it pay to pay attention to? European Journal of Finance, 27, 1740–1764. https://doi.org/10.1080/1351847X.2021.1911823
Duwal, S. R. (2021). A Systematic Review of Dividend Policy in Relation to Stock Price, International Research Journal of Management Science, 6(1), 92-104.
Fort, M., Manaresi, F., & Trucchi, S. (2016). Adult financial literacy and households’ financial assets: the role of bank information policies. Economic Policy, 31(88), 743-782. https://doi.org/10.2307/26566861
Foster, F. D., Ng, J., & Wee, M. (2015). Presentation format and financial literacy: accessibility and assessability of retirement savings statements. Journal of Consumer Affairs, 49(3), 519-549.
Gamble, K. J., Boyle, P. A., Yu, L., & Bennett, D. A. (2015). Aging and financial decision making. Management Science, 61(11), 2603-2610. https://doi.org/10.1287/mnsc.2014.2010
Gargano, A., & Rossi, A. G. (2018). Does it pay to pay attention?. The Review of Financial Studies, 31(12), 4595-4649. https://doi.org/10.1093/rfs/hhy050
Giofré, M. (2017). Financial education, investor protection and international portfolio diversification. Journal of international money and finance, 71, 111-139. https://doi.org/10.1016/j.jimonfin.2016.11.004
Graña-Alvarez, R., Lopez-Valeiras, E., Gonzalez-Loureiro, M., & Coronado, F. (2022). Financial literacy in SMEs: A systematic literature review and a framework for further inquiry. Journal of Small Business Management, 1-50. https://doi.org/10.1080/00472778.2022.2051176
Guiso, L., Viviano, E., 2015. How much can financial literacy help? Review of Finance, 19, 1347–1382. https://doi.org/10.1093/rof/rfu033
Hermansson, C., Jonsson, S., & Liu, L. (2022). The medium is the message: Learning channels, financial literacy, and stock market participation. International Review of Financial Analysis, 79, 101996. https://doi.org/10.1016/j.irfa.2021.101996
Jappelli, T., & Padula, M. (2015). Investment in financial literacy, social security, and portfolio choice. Journal of Pension Economics and Finance, 14, 369–411. https://doi.org/10.1017/S1474747214000377
Jin, J., Kanagaretnam, K., Liu, Y.I., & Cheng, M. (2021). Does Citizens’ Financial Literacy Relate to Bank Financial Reporting Transparency? European Accounting Review, 30, 887–912. https://doi.org/10.1080/09638180.2021.1965897
Kim, D. (2015). Depositor Runs and Financial Literacy.
Kramer, M. M. (2016). Financial literacy, confidence and financial advice seeking. Journal of Economic Behavior & Organization, 131, 198-217. https://doi.org/10.1016/j.jebo.2016.08.016
Lachance, M. E. (2014). Financial literacy and neighborhood effects. Journal of Consumer Affairs, 48(2), 251-273.
Lusardi, A., & Mitchell, O. S. (2014). The economic importance of financial literacy: Theory and evidence. American Economic Journal: Journal of Economic Literature, 52(1), 5-44. https://doi.org/10.1257/jel.52.1.5
Lusardi, A., Mitchell, O.S., Alesina, A., Alessie, R., Botticini, M., Campbell, J., Caplin, A., Chan, S., Engelhardt, G., Gustman, A., Hurd, M., Kapteyn, A., Mastrogiacomo, M., Ofstedal, M.B., Rodgers, W., Snyder, C., van Rooij, M., van Soest, A., Helpful, S.U., Washington, G., 2011. NBER WORKING PAPER SERIES FINANCIAL LITERACY AND PLANNING: IMPLICATIONS FOR RETIREMENT WELLBEING Financial Literacy and Planning: Implications for Retirement Wellbeing.
Mehboob, F., & Othman, N. (2020). Examining the links leading to behavioral support for change: An expectancy theory perspective. International Journal of Social Sciences and Economic Review, 2(4), 1-08. https://doi.org/10.36923/ijsser.v2i4.78
Meier, S., & Sprenger, C.D. (2013). Discounting financial literacy: Time preferences and participation in financial education programs. Journal of Economic Behavior and Organization 95, 159–174. https://doi.org/10.1016/j.jebo.2012.02.024
Moher, D., Liberati, A., Tetzlaff, J., Altman, D. G., & PRISMA Group*, T. (2009). Preferred reporting items for systematic reviews and meta-analyses: the PRISMA statement. Annals of internal medicine, 151(4), 264-269. https://doi.org/10.1136/bmj.b2535
Moreno-Montes De Oca, I., Snoeck, M., Reijers, H.A., Rodríguez-Morffi, A., 2015. A systematic literature review of studies on business process modeling quality. Information and software technology, 58, 187-205.https://doi.org/10.1016/j.infsof.2014.07.011
Mudzingiri, C., Muteba Mwamba, J.W., & Keyser, J.N. (2018). Financial behavior, confidence, risk preferences and financial literacy of university students. Cogent Economics and Finance, 6, 1–25. https://doi.org/10.1080/23322039.2018.1512366
Murugiah, L. (2016). The level of understanding and strategies to enhance financial literacy among Malaysian. International Journal of Economics and Financial Issues, 6(3), 130-139.
Nguyen, T.A.N., Nguyen, K.M., 2020. Role of financial literacy and peer effect in promotion of financial market participation: Empirical evidence in Vietnam. Journal of Asian Finance, Economics and Business 7, 1–8. https://doi.org/10.13106/JAFEB.2020.VOL7.NO6.001
Noor, N., Batool, I., & Arshad, H. M. (2020). Financial literacy, financial self-efficacy and financial account ownership behavior in Pakistan. Cogent Economics & Finance, 8(1), 1806479. https://doi.org/10.1080/23322039.2020.1806479
Okello Candiya Bongomin, G., Munene, J. C., & Yourougou, P. (2020). Examining the role of financial intermediaries in promoting financial literacy and financial inclusion among the poor in developing countries: Lessons from rural Uganda. Cogent Economics & Finance, 8(1), 1761274. https://doi.org/10.1080/23322039.2020.1761274
Organisation for Economic Co-operation and Development., 2013. PISA 2012 assessment and analytical framework: mathematics, reading, science, problem-solving and financial literacy. OECD.
Pahlevan-Sharif, S., Mura, P., & Wijesinghe, S. N. (2019). A systematic review of systematic reviews in tourism. Journal of Hospitality and Tourism Management, 39, 158-165. https://doi.org/10.1016/j.jhtm.2019.04.001
Pangestu, S., & Karnadi, E. B. (2020). The effects of financial literacy and materialism on the savings decision of generation Z Indonesians. Cogent Business & Management, 7(1), 1743618. https://doi.org/10.1080/23311975.2020.1743618
Rahadi, R. A., Danella, J., & Okdinawati, L. (2019). The Correlation between Financial Literacy and Family Wealth Distribution in Bandung. European Journal of Business and Management Research, 4(2). https://doi.org/10.24018/ejbmr.2019.4.2.34
Reddy, K. S., & Mahapatra, M. S. (2017). Risk tolerance, personal financial knowledge and demographic characteristics-evidence from India. The Journal of Developing Areas, 51(3), 51-62. https://doi.org/10.2307/26416932
Stålnacke, O. (2019). Individual investors’ information use, subjective expectations, and portfolio risk and return. The European Journal of Finance, 25(15), 1351-1376. https://doi.org/10.1080/1351847X.2019.1592769
Tranfield, D., Denyer, D., & Smart, P. (2003). Towards a methodology for developing evidence‐informed management knowledge by means of systematic review. British journal of management, 14(3), 207-222.
Vaarmets, T., Liivamägi, K., & Talpsepp, T. (2019). How does learning and education help to overcome the disposition effect?. Review of Finance, 23(4), 801-830. https://doi.org/10.1093/rof/rfy006
Van Rooij, M. C., Lusardi, A., & Alessie, R. J. (2012). Financial literacy, retirement planning and household wealth. The Economic Journal, 122(560), 449-478.
Published
2023-02-28
How to Cite
Maurya, R., Mohta, A., & Shunmugasundaram, V. (2023). IMPACT OF FINANCIAL LITERACY ON INVESTORS: A SYSTEMATIC LITERATURE REVIEW USING PRISMA PROTOCOL. International Journal of Accounting & Finance Review, 14(1), 53-66. https://doi.org/10.46281/ijafr.v14i1.1975
Section
Research Paper/Theoretical Paper/Review Paper/Short Communication Paper
Copyright (c) 2023 Ritika Maurya, Anu Mohta, V Shunmugasundaram
This work is licensed under a Creative Commons Attribution 4.0 International License.
