The moderator effect of financial literacy on the relationship between locus of control and financial behavior

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Mutlu Ü., Özer G.

KYBERNETES, vol.51, no.3, pp.1114-1126, 2022 (SCI-Expanded) identifier identifier

  • Publication Type: Article / Article
  • Volume: 51 Issue: 3
  • Publication Date: 2022
  • Doi Number: 10.1108/k-01-2021-0062
  • Journal Name: KYBERNETES
  • Journal Indexes: Science Citation Index Expanded (SCI-EXPANDED), Scopus, Academic Search Premier, Aerospace Database, Applied Science & Technology Source, BIOSIS, Communication Abstracts, Compendex, Computer & Applied Sciences, INSPEC, Metadex, zbMATH, Civil Engineering Abstracts
  • Page Numbers: pp.1114-1126
  • Keywords: Behavioral finance, Financial literacy, Locus of control, Financial behavior, G00, G40, G41, EXTERNAL CONTROL, EDUCATION
  • Kocaeli University Affiliated: Yes

Abstract

Purpose This study examines the effects of variables such as financial literacy and locus of control on the financial behavior of individual investors. Additionally, this article aims to reveal the moderator effect of financial literacy on locus of control and financial behavior. Design/methodology/approach Responses were collected from a questionnaire given to a convenience sample of 1,347 individual investors. Exploratory factor analysis (EFA), which reveals the factor structure of the scale, was used at the beginning of the study, and then confirmatory factor analysis (CFA) was performed to confirm this new factor structure. Hypothetical relationships were examined using structural equation modeling. Findings The study provides statistical support for the validity and reliability of the scales. The statistical results of the analysis reveal that financial literacy and locus of control have a positive effect on financial behavior. Moreover, the authors prove that financial literacy changes the relationship between internal locus of control and financial behavior. In conclusion, financial literacy plays a significant role as a moderator variable that interacts with locus of control. Originality/value The findings of the research are important in demonstrating empirical evidence for the theoretical correlations. In support of the current literature, this study has confirmed the positive effects of internal locus of control and financial literacy on the financial behavior of individual investors. In addition, it has been determined that the relationship between an individual's financial behavior and internal locus of control varies according to their level of financial literacy.