The Effects of Anxiety and Self-Efficacy on Finance Students

Article excerpt

Because of their quantitative content, Finance courses are particularly difficult for business majors. Math-related material causes many students to become anxious, which can impede their learning and their performance. Also, students who think they will perform poorly on a task do worse than those who think they will succeed. The difference is the student's self-efficacy. This exploratory study attempted to examine "Finance anxiety" in business students by creating a Finance Anxiety Scale to measure that phenomenon, as well as its relation to the construct of self-efficacy. The objective of this research was to begin examining whether or not the critical message of finance could be made more accessible to students without diluting the necessarily rigorous nature of the discipline. The results and implications of this preliminary study are discussed, as well as essential future research.


Even though knowledge of finance is considered critical to success in business, studies indicate that many business students have more difficulty with Finance courses than any other business discipline. Literature suggests that this is primarily due to the quantitative nature of Finance. Quantitative material causes many students to become anxious. Anxiety, in turn, is said to impede performance, causing students to fall behind in class and to postpone initiating remedial action. At the same time, reports show that students who think they can perform well on a particular task do better than those who think they will fail. This paper describes an attempt to measure and assess this Finance-course anxiety. Furthermore, it examines the relationship between Finance anxiety and self-efficacy--an individual's confidence in his or her ability to accomplish a task. Finally, the paper discusses the implications of this exploratory study and suggests necessary future research.

Review of Literature

Financial performance is considered the chief indicator of the success of organizational decisions and activities (Thompson, Strickland, & Gamble, 2006). As a consequence, a weak understanding of finance could have a very detrimental effect on a businessperson's decision making ability and career prospects. Yet according to the Educational Testing Service (2000), seniors at 388 colleges and universities taking the "Major Field Test in Business II" scored lower on the Finance section than for any other discipline--at the 38th percentile. Studies by individual undergraduate business programs have produced similar findings. Literature indicates that most business students find Finance courses to be particularly difficult and challenging (Balachandran & Skully, 2004),and students with weaker quantitative skills delay taking the required math or statistics courses that are typically prerequisites for Finance. This results in less well prepared and poorer performing students (Marcal & Roberts, 2001). Studies attribute this largely to the quantitative nature of a Finance curriculum (Krishnan, Chenchuramarah, Bathala, Khattacharya, & Ritchey, 1999). That is, mathematics anxiety manifests itself in all quantitatively related environments (Baloglu, 2002).

Math anxiety is defined as "any situation in which an individual experiences anxiety when confronted with mathematics in any way" (Byrd, 1982, p. 38). There is also agreement that anxiety is related to performance (Balachandran & Skully, 2004; Tobias & Everson, 1997), and that anxiety has been shown to have a debilitating effect on learning and achievement (Gaudy & Spielberger, 1971; Tobias, 1980). What is more, this phenomenon is wide spread. In a study of the learning and study characteristics of business students, Sizoo, Malhotra, and Bearson (2002) found that of the 10 subscales on the Learning & Study Strategies Inventory (LASSI),respondents uniformly scored lower on the Anxiety subscale. That is, whether they were male or female, American or international, adult or traditional-aged business students, anxiety was their greatest obstacle to learning. …