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1 – 10 of over 1000Patrícia de Oliveira Campos and Marconi Freitas da Costa
This study aims to further analyse the decision-making process of low-income consumer from an emerging market by verifying the influence of regulatory focus and construal level…
Abstract
Purpose
This study aims to further analyse the decision-making process of low-income consumer from an emerging market by verifying the influence of regulatory focus and construal level theory on indebtedness.
Design/methodology/approach
An experimental study was carried out with a design 2 (regulatory focus: promotion vs prevention) × 2 (psychological distance: high vs low) between subjects, with 140 low-income consumers.
Findings
Our study points out that the propensity towards indebtedness of low-income consumer is higher in a distal psychological distance. We found that promotion and prevention groups have the same propensity to indebtedness. Moreover, we highlight that low-income consumers are prone to propensity to indebtedness due to taking decisions focused on the present with an abstract mindset.
Social implications
Financial awareness advertisements should focus on providing more concrete strategies in order to reduce decision-making complexity and provide ways to reduce competing situations that could deplete self-regulation resources. Also, public policy should organize educational programs to increase the low-income consumer's ability to deal with personal finances and reduce this task complexity. Finally, educational financial programs should also incorporate psychology professionals to teach mindfulness techniques applied to financial planning.
Originality/value
This study is the first to consider regulatory focus and construal level to explain low-income indebtedness. This paper provides a deeper analysis of the low-income consumers' decision process. Also, it supports and guides future academic and decision-making efforts.
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Celso Augusto de Matos, Valter Vieira, Katia Bonfanti and Frederike Monika Budiner Mette
The purpose of this is to propose a model in which materialism is a mediator of the effects of self-esteem, impulsiveness, attitude toward debt, attitude toward credit card and…
Abstract
Purpose
The purpose of this is to propose a model in which materialism is a mediator of the effects of self-esteem, impulsiveness, attitude toward debt, attitude toward credit card and economic vulnerability on consumer indebtedness. The effects of financial knowledge, financial ability, credit card use and demographic variables are also taken into account.
Design/methodology/approach
Survey data from a sample of 1,245 low-income consumers from Brazil were used to test the hypotheses using structural equation modeling.
Findings
First, materialism has a significant effect on consumer indebtedness; at the same time, it is influenced by self-esteem, impulsiveness and attitude toward debt. Second, materialism acts as a mediator, e.g. higher impulsiveness triggers materialism, which influences debt level. Third, indebtedness is higher for women and those who use a higher number of credit cards and are more educated.
Social implications
Financial education programs should work to increase individual’s perceived ability to manage money, as the individuals who feel less able to manage their personal finances alone (i.e. lower financial ability) presented higher indebtedness.
Originality/value
This study investigates consumer indebtedness by addressing factors that have been analyzed independently in the literature. The research combines psychological, financial and economic factors with credit card use and demographic variables to explain consumer indebtedness. Moreover, the study supports the mediating role of materialism for the antecedents of consumer indebtedness, e.g. impulsiveness and attitude toward debt.
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Farah Diba M.A. Abrantes-Braga and Tânia Veludo-de-Oliveira
This study aims to develop and test a parsimonious theoretical model of risky indebtedness behaviour, a facet of over-indebtedness that refers to the behavioural tendency of often…
Abstract
Purpose
This study aims to develop and test a parsimonious theoretical model of risky indebtedness behaviour, a facet of over-indebtedness that refers to the behavioural tendency of often assuming hazardous debt levels.
Design/methodology/approach
The authors administered an online survey to credit card owners (n = 1,288) in an emerging economy in which consumer credit is characterized by extremely high interest rates (i.e. Brazil). The authors used covariance-based structural equation modelling to analyse the data and test for mediation effects.
Findings
Individuals who inadvertently consider their credit limits a part of their current income or are typically anxious about money are prone to engage in impulsive buying and, consequently, risky indebtedness behaviour. By engaging in such indebtedness behaviour, individuals weaken their financial preparedness for emergencies, which potentially jeopardizes their overall financial well-being.
Research limitations/implications
As indebtedness is a highly sensitive issue, the self-report measures used may have produced social desirability bias.
Practical implications
This study discusses the responsibility of financial institutions to support consumers in building awareness on how to adequately use financial services and to provide credit access to high-risk consumers. Policymakers need to ensure that those in the private sector play fairly.
Originality/value
This study adds new knowledge about how destructive financial behaviours operate and impact marketing and consumers’ financial well-being. It theorizes about indebtedness by critically examining existing and newly developed concepts in the financial services marketing literature.
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Gianni Betti, Neil Dourmashkin, Mariacristina Rossi and Ya Ping Yin
This paper seeks to measure and characterise the extent of consumer over‐indebtedness among the European Union (EU) member states.
Abstract
Purpose
This paper seeks to measure and characterise the extent of consumer over‐indebtedness among the European Union (EU) member states.
Design/methodology/approach
The study evaluates alternative measures of over‐indebtedness on the basis of the permanent‐income/life‐cycle theories of consumption behaviour and adopts a subjective approach in identifying over‐indebted households on the basis of European household survey data. It then investigates the main characteristics of over‐indebted households.
Findings
The empirical results reveal that over‐indebtedness was a significant problem across EU member states in the mid‐1990s. Moreover, an inverse relationship emerged between the extent of the over‐indebtedness problem and the extent of consumer borrowing across EU countries.
Research limitations/implications
Anecdotal evidence seemed to suggest that some main factors behind over‐indebtedness could be “market failure” on the credit market, the existence of liquidity constraints and lack of access to formal credit markets. However, a comprehensive and rigorous investigation of the extent and determinants of over‐indebtedness can only be achieved through analysis of more extended household data sets, particularly panel data.
Practical implications
The EU credit markets exhibited certain symptoms of “market failure”, on the one hand, and there was also need for further financial liberalisation in the Southern European countries, on the other hand.
Originality/value
The paper provides a first systematic evaluation of existing measures of consumer over‐indebtedness as well as the first EU‐wide empirical investigation of the problem. It should provide valuable information to the credit industry as well as financial regulatory bodies.
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Fei Zou and Yanju Zhou
The goal of this study is to investigate the mediating effect of referral rewards on consumer willingness to recommend poverty-alleviating products and to identify the most…
Abstract
Purpose
The goal of this study is to investigate the mediating effect of referral rewards on consumer willingness to recommend poverty-alleviating products and to identify the most effective referral rewards for incentivizing consumers to recommend poverty-alleviating products.
Design/methodology/approach
Tournament rewards and piece-rate rewards are designed based on the theory of indebtedness, the related literature and the actual background. SPSS 26.0 and AMOS 17.0 are used to analyze the structural equation model.
Findings
According to the structural equation analysis, the following findings were found: under the tournament reward condition, social image, feelings of indebtedness and perceived reward value negatively affect consumer willingness to recommend. Under the piece-rate reward condition, social image and feelings of indebtedness significantly negatively affect consumer recommendation willingness, while perceived reward value significantly positively affects consumer recommendation willingness. The mean recommendation willingness of the tournament reward group is significantly lower than that of the control group. In contrast, the mean recommendation willingness of the piece-rate rewards group is significantly higher than that of the control group.
Originality/value
Based on the study findings, the authors propose that enterprises apply piece-rate rewards to incentivize consumers to recommend poverty-alleviating products when designing such rewards. In this way, the sale of poverty-alleviating products can be improved.
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Kingstone Mutsonziwa and Ashenafi Fanta
Although credit plays a crucial role in modern society, the increased availability of credit is partly responsible for higher levels of debt burden and household over-indebtedness…
Abstract
Purpose
Although credit plays a crucial role in modern society, the increased availability of credit is partly responsible for higher levels of debt burden and household over-indebtedness. However, despite the serious consequences of over-indebtedness on household welfare our understanding of the factors that determine over-indebtedness and the link between over-indebtedness and poverty is limited. The purpose of this paper is therefore to identify drivers of over-indebtedness at an individual level and its link with poverty.
Design/methodology/approach
The authors analysed the determinants of over-indebtedness and its links with poverty employing a binary logistic regression model using data on 51,359 individuals from 11 economies in the Southern Africa Development Community.
Findings
The results suggest that over-indebtedness is driven by, among others, lack of credit literacy, cross-borrowing and income. The results also suggest that over-indebtedness is likely to impoverish the indebted.
Practical implications
Policies that encourage access to financial services such as credit should be designed such that increased financial inclusion does not aggravate poverty and inequality.
Originality/value
The authors used a unique financial inclusion survey that reports data on financial inclusion and poverty measures to identify the determinants of over-indebtedness and its link with poverty.
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Syam Kumar and Jogendra Kumar Nayak
This study aims to establish that the relationship between the risky indebtedness behavior (RIB) of consumers and their attitude toward adopting buy-now-pay-later (BNPL) is not…
Abstract
Purpose
This study aims to establish that the relationship between the risky indebtedness behavior (RIB) of consumers and their attitude toward adopting buy-now-pay-later (BNPL) is not immediate but is mediated through impulse buying. Moreover, it explores how perceived risk moderates the association between the attitude to adopt BNPL and its adoption intention.
Design/methodology/approach
This study used the existing theoretical and empirical evidence to propose a model and validated it using the data collected from 339 young shoppers in India. Analysis of data is conducted using partial least squares structural equation modeling.
Findings
The study results show that consumers’ RIB is not directly related to their attitude toward BNPL. However, impulse buying fully mediates this relationship, influencing the attitude toward BNPL. Impulse buying and attitude serially mediate the relationship between RIB and BNPL adoption intention. Further, in the context of BNPL, perceived risk strengthens the attitude-intention gap.
Practical implications
This study advises policymakers and BNPL providers to carefully assess users’ creditworthiness to prevent those already in debt from entering into a detrimental loop.
Originality/value
This study provides novel perspectives on consumer’s RIB and BNPL within the Indian context. The study additionally identifies the mediating influence of impulse buying and the moderating effect of perceived risk on BNPL adoption intention.
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Akanksha Goel and Shailesh Rastogi
The purpose of the study is to identify certain behavioural and psychological traits of the borrowers which have the tendency to predict the credit risk of the borrowers. And the…
Abstract
Purpose
The purpose of the study is to identify certain behavioural and psychological traits of the borrowers which have the tendency to predict the credit risk of the borrowers. And the second objective is to draw a conceptual model that reveals the impact of those traits on credit default.
Design/methodology/approach
The study has adopted a systematic Literature Review approach to identify those behavioural and psychological traits of borrowers that reflect on the tendency to predict the credit default of borrowers.
Findings
The findings of this study have revealed that there are some non-financial factors, which can be looked into while granting a loan to a borrower. The identified factors can be used to develop a subjective credit scoring model that can quantify and verify the soft information (character and reliability) of debtors. Further, a behavioural credit scoring model will help in easing the assessment of those borrowers, who do not have an appropriate credit history and reliable financial statements.
Practical implications
The proposed model would help banks and financial institutions to evaluate those borrowers who lack substantial financial information. Further, a subjective credit scoring model would help to evaluate the credit worthiness of such borrowers who do not have any credit history. The model would also reduce the biasness of subjective scoring and would reduce the financial constraints of borrowers.
Originality/value
By reviewing the literature, it has been observed that there are very few studies that have exclusively considered the behavioural and psychological factors in credit scoring. Several studies have linked the psychological constructs with debts, but very few researchers have considered it while constructing a behavioural scoring model. Thus, it can be inferred that this area of behavioural finance is still unexplored and needs attention of researchers worldwide. In addition, most of the studies are carried out in European, African and American regions but are almost non-existent in the Asian markets.
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Nurul Azma, Mahfuzur Rahman, Adewale Abideen Adeyemi and Muhammad Khalilur Rahman
The purpose of this paper is to develop a model for studying the propensity towards indebtedness in Malaysia using behavioural factors.
Abstract
Purpose
The purpose of this paper is to develop a model for studying the propensity towards indebtedness in Malaysia using behavioural factors.
Design/methodology/approach
A self-administered questionnaire was distributed among Malaysians who work in Klang Valley, Kuala Lumpur. The questionnaire contained several demographic variables and four behavioural factors: financial literacy, risk perception, materialism and emotions. A total of 201 completed questionnaires were received and the data were tested using structural equation modelling with partial least squares.
Findings
This study found that emotion and materialism are statistically significant for a propensity towards indebtedness, while financial literacy and risk perceptions are insignificant for a propensity towards indebtedness.
Originality/value
The results of this study would be useful in helping design better models for credit offerings and addressing credit problems in the long run.
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Simona Cosma, Stefano Cosma and Alessandro M. Peluso
The purpose of this paper is to highlight opportunities for the banking sector arising from the population’s aging and the expected reduction in pension incomes. Home equity…
Abstract
Purpose
The purpose of this paper is to highlight opportunities for the banking sector arising from the population’s aging and the expected reduction in pension incomes. Home equity conversion (HEC) instruments are a potentially useful way of restoring households’ finances and satisfying their needs, with implications for the demand for financial services.
Design/methodology/approach
By using an ordered probit regression model, the paper analyzes data obtained from a survey of 2,000 Italian households.
Findings
The main finding of this paper is that individuals with greater familiarity with consumer credit, a cognitive and decision-making approach favorable to use of credit, and an internal locus of control show greater interest in various forms of equity conversion.
Originality/value
This paper extends the analysis of the determinants of individuals’ interest in HEC products. It focuses more closely than the existing literature on households’ credit behaviors, attitudes toward credit and locus of control. The paper helps identify the potential targets of marketing campaigns and commercial proposals, and highlights the levers that the banks can focus on in communicating with customers and future prospects. Moreover, this paper suggests that there is a need to develop greater awareness on the part of people who could be interested in these products. Therefore, appropriate financial education projects should be implemented to develop a better “credit” culture, with due appreciation of the usefulness of credit as a means of supporting household budgets.
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