Factors impacting decision making behavior of retail investors envidence from vietnam

VIETNAM NATIONAL UNIVERSITY, HANOI INTERNATIONAL SCHOOL GRADUATION PROJECT PROJECT NAME FACTORS IMPACTING DECISION-MAKING BEHAVIOR OF RETAIL INVESTORS: EVIDENCE FROM VIETNAM Student’s name: Tran Ngoc Quynh Nhu Hanoi - 2020 VIETNAM NATIONAL UNIVERSITY, HANOI INTERNATIONAL SCHOOL GRADUATION PROJECT PROJECT NAME FACTORS IMPACTING DECISION-MAKING BEHAVIOR OF RETAIL INVESTORS: EVIDENCE FROM VIETNAM SUPERVISOR: DR NGUYEN THI KIM OANH STUDENT: TRAN NGOC QUYNH NHU STUDENT ID: 16071222 COHORT: AC2016C MAJOR: ACCOUNTING, AUDITING AND ANALYZING Hanoi - 2020 LETTER OF DECLARATION I hereby declare that the Graduation Project entiled “Factors impacting decision-making behavior of retail investors: Evidence from Vietnam” is the results of my own research and has never been published in any work of others During the implementation process of this project, I have seriously taken research ethics; all findings of this projects are results of my own research and surveys; all references in this project are clearly cited according to regulations I take full responsivity for the fidelity of the number and data and other contents of my graduation project Hanoi, 27/5/2020 Student (Signature and Full name) i ACKNOWLEDGEMENT “For those who make our research worth to remember” First of all, I would like to express our deep thankfulness to Dr Nguyen Thi Kim Oanh for her great instructions Without her enthusiasm, great passion and useful comments, I might not complete this project within a limited time frame I hope that I may have a chance to work with her in the near future Also, I would like to thank all investors who accepted and completed my survey I could not complete this study without their huge supports for data collection Finally, I would like to send my sincere thanks to my families for their unconditional love, perseverance, encouragement and emotional support Without them, I might not feel strong enough to finish the study ii TABLE OF CONTENT LETTER OF DECLARATION i ACKNOWLEDGEMENT ii TABLE OF CONTENT iii TABLE OF NOTATIONS AND ABBREVIATIONS v LIST OF TABLE vi LIST OF CHARTS AND FIGURE vii ABSTRACT viii CHAPTER 1: AN INTRODUCTION 1.1 Background of the study 1.2 Research objectives and research questions 1.3 Research methods 1.4 Research findings 1.5 Structure of the study CHAPTER 2: LITERATURE REVIEW 2.1 Rationale 2.2 Investment decision-making 2.3 Factors effecting investment decision-making 2.3.1 Subjective financial literacy 2.3.2 Information search 2.4 Theoretical background 2.4.1 Rational expectations theory 2.4.2 Prospect theory 2.4.3 Regret theory 2.5 Prior empirical studies on impact of investment decision-making behavior iii 2.6 Hypothesis formulation and conceptual framework 11 2.6.1 Subjective financial literacy and investment decision-making 11 2.6.2 Accounting information search and investment decision-making 12 2.6.3 Firm’s image search and investment decision-making 12 2.7 Conceptual framework 13 CHAPTER 3: RESEARCH METHOD 14 3.1 Survey as a quantitative research method 14 3.1.1 Survey design 14 3.1.2 Reliability and validity 14 3.1.3 Questionnaire design and pilot test 16 3.1.4 Measurement 17 CHAPTER 4: DATA ANALYSIS AND RESEARCH FINDINGS 20 4.1 Data analysis with PLS-SEM using Smart-PLS 20 4.1.1 Measurement model 20 4.1.2 Structural model 20 4.2 Research findings 21 4.2.1 Descriptive statistic 21 4.2.2 An evaluation of the measurement model 35 4.2.3 Structural model assessment for hypothesis testing 38 CHAPTER 5: DICUSSIONS, CONCLUSIONS AND LIMITATIONS 41 5.1 Discussions and conclusions 41 5.2 Contribution and implication of the study 41 5.3 Limitation of the study 42 REFERENCES 43 APPENDIX I iv TABLE OF NOTATIONS AND ABBREVIATIONS Abbreviation Meaning UPCoM Unlisted Public Company Market DE Decision-making behavior IM Firm’s image search ACC Accounting information search SFL Subjective financial literacy CR Composite reliability AVE Average variance extracted VIF Collinearity statistics v LIST OF TABLE Table 3.1: Factors influencing investment decision-making 18 Table 4.1: Gender 22 Table 4.2: Age 23 Table 4.3: Academic level 24 Table 4.4: Majors 25 Table 4.5: Time of investment 26 Table 4.6: Stock Exchange 27 Table 4.7: Amount of investment 28 Table 4.8: Number of stocks 31 Table 4.9: Descriptive statistics of decision-making for future profit and risks 33 Table 4.10: Descriptive statistics of subjective financial literacy 34 Table 4.11: Descriptive statistics of accounting information search 34 Table 4.12: Descriptive statistics of firm’s image 35 Table 4.13: Item loadings and composite reliability (CR) of the constructs 36 Table 4.14: Convergent validity among constructs 37 Table 4.15: Discriminant validity among constructs 37 Table 4.16: Collinearity statistics (VIF) of exogenous variables 38 Table 4.17: Impacts of information search on investment decision-making behavior 40 vi LIST OF CHARTS AND FIGURE Figure 2.1: Conceptual framework of the study 13 Figure 4.1: Gender 21 Figure 4.2: Age 22 Figure 4.3: Academic level 23 Figure 4.4: Majors 24 Figure 4.5: Time of investment 26 Figure 4.6: Stock Exchange 27 Figure 4.7: Amount of investment 28 Figure 4.8: Number of stocks 31 Figure 4.9: Measurement model 35 Figure 4.10: Structural model 38 vii ABSTRACT Purposes: This study investigates factors impacting investors’ decisionmaking behavior in Vietnam Specifically, the research focuses on effects of information search include firm’s image search, accounting information search and subjective financial literacy Design/Methodology/Approach: The research is based on a survey questionnaire delivered to a sample of 205 investors and Partial Least SquareStructural Equation Modelling is used for data analysis Findings: This study contributes to the extant literature concerning factors impacting investors’ decision-making including firm’s image, accounting information and subjective financial literacy The study finds that these factors have a strong impact on the investor's final investment decisionmaking Investors often tend to look for information especially accounting information and firm’s image about the business This helps them to decide whether to invest or not Surprisingly, although it required investment experience, investors not fully understand about the financial market However, they are interested in financial market and it will take more time to search about it Implications: The research findings help to understand factors that might influence investors’ decision-making in a certain context, Vietnam This provides investors and those who intend to invest in the future with empirical evidence that can be taken into considerations in the process of information search Key words: Investors’ decision-making, investment decision-making behavior, information search, firm’s image search, accounting information search, subjective financial literacy viii Table 4.10: Descriptive statistics of subjective financial literacy Subjective financial literacy What is your knowledge of the financial markets? Standard CODE Mean deviation SFL 2.863 0.993 Actual range Min Max Theoretical range Min Max Investors reported their firm’s image search and accounting information search are relatively necessary: most item means of these two dimensions of investors’ decision-making behavior are higher than 3.3 with the standard deviation ranging from 0.7 to 0.9 (see Table 4.11 and 4.12) This indicates that information search about firm’s image and accounting information have strong impact on investment decision-making behavior Table 4.11: Descriptive statistics of accounting information search Accounting information search I will invest based on share price I look at P/E ratio for my investment I want to search dividend policy of company I will invest in shares immediately after dividend announcement Share price affordability of company constitute a major role in my investment Standard CODE Mean deviation Actual range Min Max Theoretical range Min Max ACC1 3.522 0.924 5 ACC2 3.615 0.792 5 ACC3 3.551 0.891 5 ACC4 3.351 0.928 ACC5 3.727 0.748 34 1 5 Table 4.12: Descriptive statistics of firm’s image Firm’s image search I will check firm’s status I will check market status of firm’s product and services I think firm’s image is an important factor influencing investment decision making Standard CODE Mean deviation Actual range Min Max Theoretical range Min Max IM1 3.795 0.770 5 IM2 3.800 0.805 5 IM3 3.790 0.844 5 4.2.2 An evaluation of the measurement model The measurement model (see Figure 4.9) enables researchers to evaluate reliabilities of measures based on the item loadings, the composite reliability (CR), the average variance extracted (AVE) and discriminant validity of constructs Figure 4.9: Measurement model 35 4.2.2.1 Assessing reliability of the constructs As shown in Table 4.13, outer loadings of all items measuring the constructs of the study are greater than 0.4 The lowest item loadings are ACC5 and DE4 (0.641 and 0.699 respectively) T-statistics of all items are greater than 1.96, which indicates significances between the items and the corresponding constructs Composite reliabilities of all constructs are greater than 0.708 manifests internal consistency of the items to its corresponding constructs (Items are retained in the model if its outer loadings are greater than 0.4 and the composite reliability of the construct is greater than 0.708) Table 4.13: Item loadings and composite reliability (CR) of the constructs Items Outer loadings T-statistics CR (Bootstrap) DE1 0.762 19.169 DE2 0.765 22.923 DE3 0.769 19.329 DE4 0.699 14.327 SFL 1.000 ACC1 0.851 45.167 ACC2 0.710 14.778 ACC3 0.814 27.350 ACC4 0.782 28.594 ACC5 0.641 11.975 IM1 0.731 10.005 IM2 0.844 22.061 IM3 0.724 10.503 0.837 1.000 36 0.874 0.811 4.2.2.2 Assessing reliability of the constructs As shown in Table 4.14, The AVE of all measures is greater than 0.5 indicates convergent validity of all constructs: the items measure its corresponding constructs share considerable number of variances because these items tap into the underlying constructs rather than measurement error (Hair et al., 2014) Table 4.14: Convergent validity among constructs Constructs AVE DE 0.562 SFL 1.000 ACC 0.583 IM 0.590 The discriminant validity of the constructs is satisfied: diagonal elements (in bold), square root of AVE of each construct, is greater than its highest correlation with any other constructs (off-diagonal elements) in the model (see Table 4.15) Table 4.15: Discriminant validity among constructs ACC DE IM ACC 0.763 DE 0.659 0.749 IM 0.636 0.411 0.768 SFL 0.091 -0.137 0.192 37 SFL 1.000 4.2.3 Structural model assessment for hypothesis testing The structure model (see Figure 4.10) enables the formulated hypotheses are tested Figure 4.10: Structural model 4.2.3.1 Detecting multicollinearity Multicollinearity is detected before testing formulated hypotheses As shown in Table 4.16, VIFs of the exogenous variables of the model are much lower than 5, which indicate a problem of multicollinearity between exogenous variables is not presented in the model (Hair et al., 2014) Table 4.16: Collinearity statistics (VIF) of exogenous variables DE 1.040 1.683 1.733 SFL ACC IM 38 4.2.3.2 Effect of information search on investment decision making behavior Table 4.17 shows the results of data analysis regarding relationships between information search and investors’ decision-making behavior The hypothesis H2 concerning the effect of accounting information on investors’ decisionmaking is confirmed (β =0.657, p