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Article
Publication date: 25 June 2018

Liana Holanda Nepomuceno Nobre, John E. Grable, Wesley Vieira da Silva and Fábio Chaves Nobre

The purpose of this paper is to establish a conceptual model for managerial risk taking that considers objective measures related to an organization’s characteristics and…

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Abstract

Purpose

The purpose of this paper is to establish a conceptual model for managerial risk taking that considers objective measures related to an organization’s characteristics and subjective factors related to a decision maker’s profile.

Design/methodology/approach

A multilevel process-centered managerial decision-making framework was developed based on previously published risk taking models. The framework accounts for the conflict between agents and principals, as well as the macro- and micro-level environments in which risky decisions are made.

Findings

The integrative model presented in this paper provides a theoretically robust tool that can be used to further explore the interrelationships among known risk concepts that influence decision making in corporate settings.

Research limitations/implications

The present research is a conceptual model for managerial risk-taking. Further research is needed to test the linkages and propositions within the model, developing measures of the constructs and empirically testing the relationships among the dimensions of risk.

Practical implications

The proposed model can help firms define what manager profile is most suitable in terms of a match to the company’s investment strategy.

Originality/value

This paper is theoretically valuable in describing the relationships among several elements of risk: risk need, risk capacity, risk profile, risk perception, and risk tolerance. Future directions for empirical research are also presented.

Details

Management Decision, vol. 56 no. 11
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 25 June 2021

John E. Grable and Eun Jin Kwak

Using data obtained from 525 individuals who were surveyed during early spring 2020, this study addressed three aims: (1) to ascertain the degree to which disappointment aversion…

446

Abstract

Purpose

Using data obtained from 525 individuals who were surveyed during early spring 2020, this study addressed three aims: (1) to ascertain the degree to which disappointment aversion and expectation proclivity are related; (2) to identify who is most likely to exhibit patterns of disappointment aversion; and (3) to determine to what extent the combination of disappointment aversion and expectation proclivity is associated with financial risk aversion.

Design/methodology/approach

Several analytic methods were used in this study. Descriptive statistics were calculated for each of the measures examined in this study. Correlation, analysis of variance (ANOVA) and regression techniques were used to estimate associations between and among the variables of interest in this study.

Findings

A negative relationship between disappointment aversion and expectation proclivity was noted, which is counter to conventional thinking. It is traditionally thought that those who establish high expectations will experience the greatest disappointment when choice outcomes fall below expectations. In this study, it was determined that when a financial decision-maker consistently establishes high outcome expectations and results fall below expectations, the financial decision-maker feels less disappointment. More precisely, those who consistently establish high expectations tend to be more disappointment tolerant than others.

Research limitations/implications

This paper provides evidence that categories of disappointment aversion and expectation proclivity are associated with financial risk aversion and certain demographic characteristics.

Practical implications

This paper adds support for assertions made in the International Journal of Bank Marketing (IJBM) that it is important for financial service professionals and bankers to manage customer expectations to reduce disappointment with products and services. This paper shows that combinations of disappointment aversion and expectation proclivity are related to the financial risk aversion of customers.

Social implications

Findings from this paper indicate that a commonly used heuristic that decision-makers should reduce expectations to avoid disappointment may not be accurate or particularly useful in the context of financial decision-making.

Originality/value

Findings from this study add to the existing body of literature by showing that aversion to disappointment and the establishment of expectations, while distinct concepts, are interrelated.

Details

International Journal of Bank Marketing, vol. 39 no. 7
Type: Research Article
ISSN: 0265-2323

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Article
Publication date: 24 August 2020

Wookjae Heo, John E. Grable and Abed G. Rabbani

The purpose of this paper is to provide an estimate of the degree to which financial risk tolerance changed in relation to the initial surge of COVID-19 cases in the US.

2444

Abstract

Purpose

The purpose of this paper is to provide an estimate of the degree to which financial risk tolerance changed in relation to the initial surge of COVID-19 cases in the US.

Design/methodology/approach

Data from a large sample of investors and other consumers covering the period beginning April 2019 and ending in early May 2020 were used to estimate aggregate levels of financial risk tolerance and to determine if the willingness to take financial risk changed across five distinct periods in relation to the spread of COVID-19.

Findings

A general reduction in aggregate levels of financial risk tolerance was observed during the initial peak of COVID-19 period and the subsequent declaration of a pandemic, with the most significant drop in risk tolerance being exhibited by those who were 25 years of age or younger.

Practical implications

The findings from this study – primarily that in terms of FRT, the COVID-19 pandemic impacted young people disproportionately – suggest that in addition to helping young people feel comfortable in terms of their personal health situation and access to employment and health insurance, policy makers, financial service firms and financial literacy educators should provide information and guidance to young people regarding why being willing to take financial risks is important and how FRT corresponds to the proper functioning of the investment markets.

Originality/value

A data-drive methodology was utilized in this study to define the periods. This approach was taken due to the lack of defined and published pandemic interval periods specific to COVID19. However, the findings based on the data-driven methodology bring practical implications such as young people are sincerely considered in the catastrophic situation.

Details

Review of Behavioral Finance, vol. 13 no. 1
Type: Research Article
ISSN: 1940-5979

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Book part
Publication date: 19 June 2019

Antonietta Bonello

Abstract

Details

Understanding the Investor: A Maltese Study of Risk and Behavior in Financial Investment Decisions
Type: Book
ISBN: 978-1-78973-705-9

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Article
Publication date: 6 August 2024

John Grable, Kristy Archuleta, Kimberly Watkins and Eun Jin (E.J.) Kwak

Unbanked status in the United States varies across the population, but the phenomenon of being unbanked tends to be more pronounced for Black households. This paper extends the…

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Abstract

Purpose

Unbanked status in the United States varies across the population, but the phenomenon of being unbanked tends to be more pronounced for Black households. This paper extends the current body of literature by conceptualizing banked status as an element of financial inclusion and by expanding the number and type of variables used to describe banked status.

Design/methodology/approach

This study’s theoretical orientation was informed by the work of Blanco et al. (2019). Survey data used in this study were gathered between May 2021 and February 2022 by Elevate's Center for the New Middle Class. Data were analyzed as a secondary dataset for this study. Three methods were used to evaluate the data. First, sample descriptives were calculated. Second, a correlation analysis was conducted to evaluate the associations between variables and to ensure that multicollinearity would not be an issue at the third stage of analysis. Third, a logistic regression was estimated to identify the variables that were significantly associated with being banked (i.e. holding a checking or savings account) (coded 1) or being unbanked (coded 0).

Findings

In this study, 17% of Black households were currently excluded from the financial marketplace. Factors of particular importance in describing unbanked status include being younger than age 55, identifying as male, being married, reporting higher income, relying on the use of credit more often, experiencing employment/financial stress more frequently, less trust in mainstream banking institutions, and inaccessibility to banks and credit unions. Implications for policy and practice are discussed.

Originality/value

This study adds to the financial inclusion literature by illustrating how unbanked status in the United States varies across the population, but that in general, a few common markers differentiate the banked and unbanked status of Black households. Factors of particular importance in describing unbanked status include being younger than age 55, identifying as male, being married, reporting higher income, relying on the use of credit more often, experiencing employment/financial stress more frequently, less trust in mainstream banking institutions, and inaccessibility to banks and credit unions. Implications for policy and practice are discussed.

Details

International Journal of Bank Marketing, vol. 43 no. 1
Type: Research Article
ISSN: 0265-2323

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Article
Publication date: 13 June 2023

John Grable, Eun Jin Kwak and Kristy Archuleta

The purpose of this study was to explore the concept of distrust of traditional banking institutions as a factor that can explain the choice to remain unbanked in a marketplace…

305

Abstract

Purpose

The purpose of this study was to explore the concept of distrust of traditional banking institutions as a factor that can explain the choice to remain unbanked in a marketplace that is designed to be financially inclusive.

Design/methodology/approach

Earning, spending, saving and borrowing data collected between May 2021 and February 2022 from 17,819 consumers living in the United States were used to examine the factors associated with distrust of banks. Using a conceptual framework borrowed from the health services profession, the study was conducted in two stages. At the first stage, distrust among the unbanked and banked was estimated using a Boruta-random forest algorithm. At the second stage of the analysis, a logit regression model was estimated to validate the variables identified in the Boruta-random forest analysis.

Findings

Results from the analyses show that distrust of banks is multi-layered where being older, believing the country is heading in the wrong direction and being less confident in one's ability to obtain a personal loan in the amount of $1 to $999 are important factors related to distrust of banks among the unbanked.

Research limitations/implications

This study shows how an ensemble machine learning technique based on a decision-tree methodology can be used to obtain unique insights into complicated data and large datasets within the bank marketing field.

Originality/value

The paper provides a discussion about ways domains of trust and specific variables can be utilized to address the persistent problem of financial exclusion in the United States. Implications for bankers, researchers, educators and policymakers are provided.

Details

International Journal of Bank Marketing, vol. 41 no. 6
Type: Research Article
ISSN: 0265-2323

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Book part
Publication date: 10 February 2020

Joseph John Woods, Sharon Seychell, Ercan Ozen, Jonathan Spiteri, Robert Suban and Simon Grima

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…

Abstract

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.

Details

Contemporary Issues in Audit Management and Forensic Accounting
Type: Book
ISBN: 978-1-83867-636-0

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Article
Publication date: 28 June 2018

Kumar Saurabh and Tanuj Nandan

The purpose of this paper is to examine the relationships between financial knowledge, socialization and financial satisfaction with financial risk attitude and financial behavior…

2364

Abstract

Purpose

The purpose of this paper is to examine the relationships between financial knowledge, socialization and financial satisfaction with financial risk attitude and financial behavior as a mediator after demonetization and introduction of GST.

Design/methodology/approach

The sample consisted responses of 286 individuals from the city of Allahabad, Uttar Pradesh, India and making financial decisions for the household for at least last two years. The data were analyzed using exploratory factor analysis and mediation regression analysis.

Findings

All sub-scales used to measure constructs had satisfactory reliabilities and internal consistencies. It was found that financial risk attitude and financial behavior both mediate the relationship between financial socialization and financial satisfaction as well as between financial knowledge and financial satisfaction.

Research limitations/implications

This research is based upon survey method and voluntary participation. Hence one can question generalization of findings to larger samples. Moreover, the study is limited to a restricted geographical region which could affect the generalization of findings.

Practical implications

Results provide insights into the antecedents of financial satisfaction of individuals from tier II city of India. Financial planners may utilize this study for enhancement of financial satisfaction of their clients and hence retention of the same.

Originality/value

A majority of researchers use survey without evaluation validity of instruments in the selected context and sample. This research contributed to the literature and practice by testing validation of constructs of financial satisfaction in India.

Details

South Asian Journal of Business Studies, vol. 7 no. 2
Type: Research Article
ISSN: 2398-628X

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Book part
Publication date: 25 May 2021

Alessandra Girlando, Simon Grima, Engin Boztepe, Sharon Seychell, Ramona Rupeika-Apoga and Inna Romanova

Purpose: Risk is a multifaceted concept, and its identification requires complex approaches that are often misunderstood. The consequence is that decisions are based on limited…

Abstract

Purpose: Risk is a multifaceted concept, and its identification requires complex approaches that are often misunderstood. The consequence is that decisions are based on limited perception rather than the full value and meaning of what risk is, as a result, the way it is being tackled is incorrect. The individuals are often limited in their perceptions and ideas and do not embrace the full multifaceted nature of risk. Regulators and individuals want to follow norms and checklists or overuse models, simulations, and templates, thereby reducing responsibility for decision-making. At the same time, the wider use of technology and rules reduces the critical thinking of individuals. We advance the automation process by building robots that follow protocols and forget about the part of risk assessment that cannot be programed. Therefore, with this study, the objective of this study was to discover how people define risk, the influencing factors of risk perception and how they behave toward this perception. The authors also determine how the perception differed with age, gender, marital status, education level and region. The novelty of the research is related to individual risk perception during COVID-19, as this is a new and unknown phenomenon. Methodology: The research is based on the analysis of the self-administered purposely designed questionnaires we distributed across different social media platforms between February and June 2020 in Europe and in some cases was carried out as a interview over communication platforms such as “Skype,” “Zoom” and “Microsoft Teams.” The questionnaire was divided into four parts: Section 1 was designed to collect demographic information from the participants; Section 2 included risk definition statements obtained from literature and a preliminary discussion with peers; Section 3 included risk behavior statements; and Section 4 included statements on risk perception experiences. A five-point Likert Scale was provided, and participants were required to answer along a scale of “1” for “Strongly Agree” to “5” for “Strongly Disagree.” Participants also had the option to elaborate further and provide additional comments in an open-ended box provided at the end of the section. 466 valid responses were received. Thematic analysis was carried out to analyze the interviews and the open-ended questions, while the questionnaire responses were analyzed using various quantitative methods on IBM SPSS (version 23). Findings: The results of the analysis indicate that individuals evaluate the risk before making a decision and view risk as both a loss and opportunity. The study identifies nine factors influencing risk perception. Nevertheless, it must be emphasized that we can continue to develop models and rules, but as long as the risk is not understood, we will never achieve anything.

Details

Contemporary Issues in Social Science
Type: Book
ISBN: 978-1-80043-931-3

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Book part
Publication date: 18 July 2022

Teena Pareek, Kiran Sood and Simon Grima

Introduction: New ideas and concepts of big data have emerged in recent years in response to the astounding growth of data in many industries. Furthermore, the phenomenal increase…

Abstract

Introduction: New ideas and concepts of big data have emerged in recent years in response to the astounding growth of data in many industries. Furthermore, the phenomenal increase in the use of the internet and social media has added enormous amounts of data to conventional data processing systems. Still, it has also created challenges for traditional data processing.

Purpose: A significant characteristic of the insurance sector is critically dependent on information. This sector generates a great deal of structured and unstructured data, which traditional data processing techniques cannot handle. As compared to conventional insurance data processing and decision-making requirements, this lesson shows an analysis of data technology’s value additions.

Research methodology: The author assesses the primary use of cases for data in the insurance industry via a case study analysis. From the perspective of the insurance sector, this chapter examines the concepts, technologies, and tools of big data. A few analytical reviews by the insurance company are also provided, which justified several gains gained either through inefficient processing of massive, diverse data sets or by supporting better decisions.

Findings: This chapter demonstrates the importance of adopting new business models that allow insurers to move beyond understand and protect and become more predictive and preventative by using the tools and technologies of big data technology.

Details

Big Data Analytics in the Insurance Market
Type: Book
ISBN: 978-1-80262-638-4

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