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Previous research examined the effectiveness of virtual reality (VR) in various fields including engineering (Alhalabi, 2016), the military (Webster, 2016), robotic surgery (Bric et al., 2016; Francis et al., 2020), firefighters (Çakiroglu and Gökoglu, 2019), negotiation training (Ding et al., 2020), health-care training (Chow et al., 2017) and ethics education (Sholihin et al., 2020). However, empirical research examining learning styles on the effectiveness of using VR is still scarce. VR has different characteristics from other learning media and high immersiveness in a VR environment can create a sense of presence that improves learning outcomes, except for students with certain learning styles who experience cognitive overload when exploring virtual environments (Hsu et al., 2017). Therefore, it is necessary to investigate to what extent learning styles can influence the effectiveness of VR-based learning on business ethics. This is because the effectiveness of business ethics education is indispensable along with the increasing cases of fraud and financial companies (PwC’s Global Economic Crime and Fraud, 2020).

Education must respond to the progress of information technology (IT) development by providing IT-based teaching methods to enhance the learning process. This is because the evolution of technology is changing student learning preferences from verbal to visual or even virtual (Proserpio and Gioia, 2007). VR is an IT-based learning media that creates a virtual environment which simulates the real world and provides concrete experiences, so students are able to actively explore their course material. VR technology is able to provide practical experiences without actually leaving home, so it is relevant for responding to the current situation due to the COVID-19 pandemic.

Compared to traditional learning, VR is a more flexible learning method as it has no limitations of time, distance and space (Yu et al., 2007). The main characteristic of VR is immersion, interaction and imagination (Zhang et al., 2017) that improve cognitive performance in engineering (Alhalabi, 2016), the military (Webster, 2016) and surgical robots (Bric et al., 2016). VR-based learning can improve students’ learning abilities compared to traditional teaching (Jena, 2016). VR has already proven effective in teaching business ethics (Sholihin et al., 2020) because VR has the ability to create a virtual world, without any impact from socially reprehensible acts. With VR, students are able to understand scenarios about ethical dilemmas that occur in business practices, observe the potential consequences and make decisions to solve concrete situations where ethical dilemmas require a response. VR allows students to simulate situations virtually and develop their long-term experience. This is crucial because there is the possibility that in the near future the society will live in a mixed world (virtual and physical space).

A virtual environment that is able to evoke a sense of presence refers to the intensity of emotional involvement. Sense of presence can actually improve the learning results, but if the user lacks the ability to explore game tasks it will cause a cognitive overload that has a negative impact on learning outcomes (Hsu et al., 2017; Huang et al., 2020). Learning style preferences cause differences in cognitive load during the learning process using VR (Hsu et al., 2017). In a VR-based learning environment, students are required to explore the virtual environment; therefore, without navigation, students with active experimental learning styles are superior to students with passive or observing learning styles (Chen et al., 2005). Therefore, it is necessary to understand the impact of adopting VR technology to improve student’s performance by considering different learning styles.

In Indonesia, the shift from offline learning to e-learning has created new academic pressures for some students (Pajarianto et al., 2020). The main challenge for educators is how to improve student’s learning outcomes and overcome the problem of using e-learning technology.

In light of the scarcity of research on the effectiveness of VR for teaching business ethics during the COVID-19 pandemic, this study fills the gap by extending the study of Sholihin et al. (2020) in that the authors establish the connection between user perception of the use of VR and learning style in relation to the effectiveness of VR.

The purpose of this paper is to investigate the process by which the level of immersion in virtual reality-based behavioral simulation (VR-BS) impacts on the non-cognitive and cognitive outcomes. The cognitive outcome is measured using the increase in the level of Sharia financial literacy, while the noncognitive outcome is measured using the behavioral intention to use VR-BS.

The method consists of two parts: First, the development of VR-BS, in the context of sharia financial literacy, using the waterfall model. Second, testing the effectiveness of VR-BS using the theory of interactive media effects framework. The participants were 142 students from three secondary schools (two Islamic religious schools and one public school) in Yogyakarta and Central Java, Indonesia. Partial least squares structural equation modeling was used for testing the hypotheses.

VR-BS creates a perceived coolness and vividness, which in turn has an impact on increasing the participants’ engagement. Also, the use of VR has an impact on natural mapping, which increases a user’s engagement through its perceived ease of use. As predicted, the user’s engagement affects VR’s behavior, mediated by the user’s attitude toward VR media. VR’s interactivity, however, does not impact on the cognitive aspect.

The participants were not randomly selected, as the data were collected during the COVID-19 pandemic. As a result, the majority of the participants had never tried VR before this study. The participants, however, were digital natives.

It is implied from the findings that Islamic financial business actors and the relevant government agencies (e.g. the Indonesian Financial Services Authority [OJK], the Ministry of Education, Culture, Research and Technology and the Ministry of Religious Affairs) should collaborate to best prepare the future generation of ummah by using VR-BS in their joint promotion and education programs. The results of the current study reveal that the use of VR-BS may attract people to engage in Islamic financial activities. By engaging in such activities, or at least engaging in real-life simulations/classes/workshops, people may gradually acquire more knowledge about Islamic finance.

As predicted, the user’s engagement has an impact on behavior toward VR-BS, which is mediated by attitude toward VR-BS.