Search results

In this chapter our objective was to gain an understanding of what affects Maltese individuals’ behaviors when it comes to retirement planning. Given that longevity is on the increase, state pension income is limited (and most probably unsustainable over the long term) and that many individuals expect to be able to enjoy a comfortable retirement, it sets out to determine which macro- and micro-environmental factors are likely to encourage positive behavior or otherwise.

We did this by consulting and analyzing existing literature in chapter 8 of this book and designing an online survey which was specifically created to capture qualitative data about public sentiment and behaviors with respect to retirement planning.

The study identifies a general sense of confusion in relation to financial concepts related to retirement. In line with other countries’ findings, the prevalence of myopia, procrastination and inertia has also been observed through the research undertaken.

Through established behavioral finance theories and literature, as well as actual European practical examples, the research explores the best ways of “nudging” people into recognizing the importance of acting and making the right long-term financial decisions, to their own benefit and to that of society.

Notwithstanding, that overall savings of the Maltese are around the average established for Europe, the study found that savings tend to be shorter term, and therefore insignificant when considering the actual requirements for the desired quality of life at retirement. The research showed how, as with other countries, behavioral biases have been limiting people from acting or making the right choices.

Of the most prominent of behaviors, procrastination, myopia, and inertia were observed. In the local market, these seemed to stem from a sense of disorientation as to the meaning of certain concepts, how to initiate the process and which actions to take. In fact, although many did not admit it outright, respondents showed low levels of confidence in their abilities, and avoid acting out of fear that it may not be the right choice. At the same time, they would try to rationalize their lack of action by the premise that things would sort themselves out, although this is typically labeled as overconfidence, it is likely to be an attempt to feel better about their stance on the matter.

Following Philip Selznick’s lead in using pragmatist social science to understand issues of public concern we conducted a study of failed innovation in the commercial construction industry (CCI). We find that social heuristics – collectively constructed and maintained interpretive decision-making frames – significantly shape economic and non-economic decision-making practices. Social heuristics are the outcome of industry-based “institutionalization processes” and are widely held and commonly relied on in CCI to reduce uncertainty endemic to decision-making; they provide actors with both a priori and ex post facto justifications for economic decisions that appear socially rational to industry co-participants. In the CCI – a project-centered production network – social heuristics as shared institutions sustain network-based social order but in so doing discourage novel technologies and impede innovation. Social heuristics are actor-level constructs that reflect macro-level institutional arrangements and networked production relations. The concept of social heuristics offers the promise of developing a genuinely social theory of individual economic choice and action that is historically informed, contextually situated, and neither psychologically nor structurally reductionist.

The authors herein carry out a literature review of retirement planning and highlights that proper retirement planning starts by looking at the level of income an individual is likely to continue receiving at retirement if they were to take no action, then comparing this to what they would need to lead the lifestyle they desire. The authors review the traditional economic theories that many are accustomed to when interpreting financial matters (i.e., rational behavior) and compares this to the various studies and articles found in literature. The authors then dig into retirement planning in Malta and the behavioral obstacles to proper planning and how these are tackled in different European countries.

While recent research has referred to a cognitive view on “business modelling,” it remains unclear in specifying the cognitive foundations of how such modelling happens. This paper proposes building on heuristics as models of individual cognition, which have proved effective foundations of adaptive individual and managerial behaviors. By also drawing on gestalt theory to specify principles of modelling as rule-based form giving, we propose business modelling as a managerial cognitive process of configuring heuristics. The paper makes three contributions. First, we introduce heuristics to the business modelling literature and so provide an established theory of adaptive individual behavior that strengthens the cognitive foundations of business modelling. Second, we conceptualize and theorize on the cognitive activity of business modelling as an iterative process of configuring heuristics by applying gestalt principles. Although the literature on business models has referred to the theories of configurations and gestalt, it has been left to this work to make the theoretical linkages between heuristics, gestalt theory and business modelling explicit. Third, our work contributes to the micro-foundations of the cognitive processes underlying business modelling and thus to broader accounts of adaptive managerial behaviors.

Independent travelers are those vacationers who have booked only a minimum of their transportation and accommodation arrangements prior to departure on the vacation. Independent travel is an important and growing sector of worldwide tourism. Choice of vacation itinerary for the independent vacation represents a complex series of decisions regarding purchase of multiple leisure and tourism services. This chapter builds and tests a model of independent traveler decision-making for choice of vacation itinerary. The research undertaken employs a two-phase, inductive–deductive case study design. In the deductive phase, the researcher interviewed 20 travel parties vacationing in New Zealand for the first time. The researcher interviewed respondents at both the beginning and the end of their New Zealand vacations. The study compares pre-vacation research and plans, and actual vacation behaviors, on a case-by-case basis. The study examines case study narratives and quantitative measures of crucial variables. The study tests two competing models of independent traveler decision-making, using a pattern-matching procedure. This embedded research design results in high multi-source, multi-method validity for the supported model. The model of the Independent Vacation as Evolving Itinerary suggests that much of the vacation itinerary experienced in independent travel is indeed unplanned, and that a desire to experience the unplanned is a key hedonic motive for independent travel. Rather than following a fixed itinerary, the itinerary of an independent vacation evolves as the vacation proceeds. The independent traveler takes advantage of serendipitous opportunities to experience a number of locations, attractions and activities that they had neither actively researched nor planned.

Although most of the traditional economic theories used to explain investor behaviour assume full investor rationality, experience proves otherwise. In this study, we examine a number of important determinants of risk appetite and tolerance, including gender, education and knowledge of financial services and loss aversion. We do this by designing a questionnaire to measure the level of risk appetite and tolerance, together with various demographic characteristics and loss aversion. The survey is administered among a random sample of 1,648 respondents from Turkey. We find that on average men exhibit a higher level of risk appetite and tolerance than women, thus suggesting a clear gender divide in terms of investment behaviour. Furthermore, knowledge of financial services is associated with higher levels of both risk appetite and tolerance, with younger respondents also exhibiting similar patterns of behaviour. By contrast, loss-averse respondents are less open and tolerant of risk, which indicates that behavioural biases such as loss aversion can have a meaningful impact on investment decisions, at odds with traditional models based on rational choice theory. The findings have a number of important implications for investment behaviour and education, including the importance of gender balance within investment committees in order to ensure a more even distribution of risk behaviour, as well as the need to incorporate considerations related to loss aversion in all aspects of policymaking and regulation.

Introduction – Markowitz (1952) argues that individuals act rationally in their financial decisions. In contrast, Kahneman and Tversky (1979) claim that the psychological characteristics of people significantly affect financial decisions. In making these decisions, factors such as age, gender, and educational status may have an impact.

Purpose – The purpose of this study is to determine whether financial literacy has an impact on individuals’ cognitive biases related to financial investments.

Methodology – A sample of 444 individuals were surveyed.

Findings – In the results of study (1) it was determined that financial literacy leads to differences in cognitive biases; and (2) cognitive biases of individuals who do not receive finance education are different from individuals who receive finance education and professionals in the business world. The findings indicate that the increase in the level of financial literacy of individuals will reduce the cognitive biases and heuristics, and therefore will have a positive effect on the investor behavior in financial markets.

Many Australasian-Anglo-American jurisdictions including Queensland, other Australian states, the Australian Commonwealth, central government in Britain, the U.S., Canada and New Zealand (Department of Finance and Administration, 2000; NZ Treasury/State Services Commission, 2002; Queensland Treasury, 1997; Treasury Board of Canada, 2000), are presently debating over “managing for outcomes.” Throughout this chapter, the acronym MFO is used to stand for this whole movement even though it implies greater coherence than exists. There is a definite movement in this direction in Australasian public services with the emergence of widespread rethinking about its purposes and characteristics. It is driven in some jurisdictions by ministers wanting to know about actual policy outcomes and less about the shiny-chrome management systems behind them and, in other jurisdictions, by senior managers in central agencies and some line agencies who are rediscovering the real purposes constituting public management. There is also some back-pedaling in relation to some aspects of the economic reform agenda that was applied too hard during the late 1980s and 1990s in this part of the world. There are also some that claim that MFO is a logical extension of the first stage of reform undertaken during the 1980s and 1990s – one in which outputs rather than outcomes was the primary focus.

Under the Patient Protection and Affordable Care Act (ACA), many low-income consumers have become eligible for government support to buy health insurance. Whether these consumers are able to take advantage of the support and to make sound decisions about purchasing health insurance likely depends on their knowledge and skills in navigating complex financial products. This ability is frequently referred to as “financial literacy.” We examined the level and distribution of consumers' financial literacy across income groups, using 2012 data collected in the RAND American Life Panel, an internet panel representative of the US population. Low financial literacy was particularly prevalent among individuals with incomes between 100% and 400% of the federal poverty level, many of whom will be eligible for health insurance subsidies. In this group, people who are young, less educated, female, and have less income were more likely to have low financial literacy. Our findings suggest the need for targeted policies to support vulnerable consumers in making good choices for themselves, possibly above and beyond the support measures already part of the ACA.

Business plan writing seems the panacea to gain stakeholder legitimacy and financial backing. Our chapter explores the contributions and disconnections between business plan writing and the start-up process for incubated technology entrepreneurs. The study is set in the South East Enterprise Platform Programme (SEEPP), an incubator programme for technology graduate entrepreneurs in the South East of Ireland. Using a purposive sample of technology entrepreneurs in start-up mode, we took a qualitative approach consisting of content analysis of 40 business plans and in-depth interviews with 25 technology entrepreneurs. Our research found that writing a detailed business plan constrains the technology entrepreneur’s natural penchant for action, compelling them to focus on business plan writing rather than enactment. Technology entrepreneurs favour a market-led rather than funding-led operational level document to plan, and learn from, near-term activities using milestones.