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Publication date: 3 July 2017

Sreeram Sivaramakrishnan, Mala Srivastava and Anupam Rastogi

The purpose of this paper is to study the influence of factors such as financial literacy on a consumer’s investment decisions, particularly in the stock market. Based on two…

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Abstract

Purpose

The purpose of this paper is to study the influence of factors such as financial literacy on a consumer’s investment decisions, particularly in the stock market. Based on two empirical studies, the theory of planned behaviour (TPB) was used to understand stock market participation (SMP) in India while developing a model to represent the relationships between the various factors. Consumer financial literacy was conceptualised to be a part of perceived behavioural control and included in the TPB.

Design/methodology/approach

A mixed methods research was followed where qualitative research preceded a quantitative survey-based study. In-depth interviews were conducted with investors and experts, results of which, when combined with the literature review, revealed seven variables including financial literacy which were pooled into three distinct groups based on the TPB. Responses obtained from 506 retail investors from four cities in India were analysed. Structural equation modelling was used to test the models and arrive at a final empirical model.

Findings

Results of the study indicated that investment intention predicts actual investments in the stock market (which represented behaviour). Financial literacy – both subjective and objective – were also found to be significant influencers on intention while only objective financial literacy seemed to affect behaviour. Three variables – perception of regulator, risk avoidance, and hassle factor – were combined to form a second-order construct which was named “Attitude to Investment Behaviour”. This had a negative impact on intention to invest in the equity markets. Financial well-being seemed to have a negative impact on intention while having a positive relationship with behaviour.

Practical implications

The results present significant investor behaviour and policy implications for financial services marketing. Some interventions, especially in the area of consumer financial literacy, are more likely than others to help consumers bridge the gap between non-participation and participation in the stock market.

Originality/value

The study makes a contribution to investor behaviour theory in the form of a comprehensive model to explain SMP in an emerging market. This can be further tested across geographies.

Details

International Journal of Bank Marketing, vol. 35 no. 5
Type: Research Article
ISSN: 0265-2323

Keywords

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Abstract

Subject area

General Management/Strategy.

Study level/applicability

Post-graduate/MBA.

Case overview

Case A: Mr Grandhi Mallikarjuna Rao, founding chairman of GMR, was considering a proposal to bid for an upcoming international airport in Hyderabad, India. The strategic move would have marked GMR’s foray into the Indian airport infrastructure sector. GMR had been involved in the development and operation of power plants and had thrived on public–private partnerships for all its projects. Mr Rao is thinking: Should GMR make another major investment in infrastructure development by bidding to build the airport in Hyderabad, India? Further, how should the organization prepare itself for this strategic move? Case B: On April 4, 2013, the meeting of GMR’s Group Executive Council (GEC) was scheduled to take place. Srinivivas Bommidala, G.M. Rao’s son-in-law and Chairman of GMR’s airports business, was gearing up for the meeting. The meeting was called to discuss a proposal for bidding for an upcoming airport project in the Philippines. It had been more than a decade since GMR entered the airport infrastructure sector. The organization had built substantial airport operating expertise during that period. It adopted a joint venture (JV) model for expanding in the airport infrastructure business. Until now, the organization had always formed JVs for all its airport projects. JVs with existing airport operators were necessitated by the bid conditions that required a certain minimum airport operating experience for qualifying as a bidder for various projects. In some cases, a JV with a local player helped GMR with market knowledge for functioning in a foreign market. GMR also used JVs to access the capabilities it lacked for operating in this sector and gradually learnt from its partners for building capabilities in-house. The group now had the required operating expertise in the sector to qualify as a bidder. One of the key issues the GEC was contemplating was: Whether GMR should continue to form JV for bidding for the upcoming project or should it go solo? Further, if it had to form a JV then, in which areas should it seek a partner?

Expected learning outcomes

Case A: To understand the relationship between key concepts in strategic management, including diversification, capabilities and core competence. To help students understand the various factors managers consider when deciding on the diversification strategy of an organization. To create an understanding of the organizational processes required to facilitate diversification into a new segment. To teach students how to evaluate a potential market opportunity that may require a firm to take on a diversification strategy. Case B: To help students understand how companies use alliances as growth strategies. To understand the rationale for formation of various alliances. To explore various factors managers consider when deciding on alliance strategy of an organization. To understand the challenges associated with using alliances as a strategic option. To understand the pros and cons of internal development (i.e. going solo) vis-à-vis strategic alliances.

Subject code

CSS 11: Strategy.

Details

Emerald Emerging Markets Case Studies, vol. 6 no. 1
Type: Case Study
ISSN: 2045-0621

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