Psychology Research and Behavior Management (Feb 2023)
The Interplay Between Financial Literacy, Financial Risk Tolerance, and Financial Behaviour: The Moderator Effect of Emotional Intelligence
Abstract
Cui Ling Song,1 Dongfang Pan,2 Arslan Ayub,3 Binbin Cai4 1Institute of Financial Technology, Suzhou Industrial Park Institute of Services Outsourcing, Suzhou, People’s Republic of China; 2College of Art and Communication, China Jiliang University, Hangzhou, People’s Republic of China; 3National School of Management Studies, the University of Faisalabad, Faisalabad, Pakistan; 4International College, Zhejiang University of Technology, Hangzhou, People’s Republic of ChinaCorrespondence: Binbin Cai, Email [email protected]: This study aims to examine financial literacy’s impact on individual investors’ financial behaviour while also investigating the mediating role of financial risk tolerance and the moderator effect of emotional intelligence.Methods: The study collects time-lagged data from 389 financially independent individual investors from leading educational institutes in Pakistan. Data are analysed using SmartPLS (v 3.3.3) to test the measurement and structural models.Results: The findings reveal that financial literacy significantly impacts the financial behaviour of individual investors. In addition, financial risk tolerance partially mediates the relationship between financial literacy and financial behaviour. Besides, the study found a significant moderating role of emotional intelligence in the direct relationship between financial literacy and financial risk tolerance and an indirect relationship between financial literacy and financial behaviour.Discussion: The study examined a hitherto unexplored relationship between financial literacy and financial behaviour, mediated by financial risk tolerance and moderated by emotional intelligence.Keywords: financial literacy, emotional intelligence, financial risk tolerance, financial behaviour
