Academic journal article Academy of Accounting and Financial Studies Journal

Reactions to the 2008 Economic Crisis and the Theory of Planned Behavior

Academic journal article Academy of Accounting and Financial Studies Journal

Reactions to the 2008 Economic Crisis and the Theory of Planned Behavior

Article excerpt

INTRODUCTION

By the early fall of 2008, all mainstream US news media began warning that problems experienced in financial institutions were having a detrimental effect on Wall Street and were threatening the stability of at least some banks. They reported on high level, urgent meetings of the Secretary of the Treasury and the Chairman of the Federal Reserve System with the heads of federal agencies and investment banks. In that environment, many middle income Americans saw the value of their financial portfolios decrease significantly, and others feared that their savings were in jeopardy. All of this psychic pain provided a unique quasi-experiment for attempts to learn about the effects of perceptions on investing and saving behavior.

Peoples' intentions and actions, in aggregate can shift economic markets, and not always in a good way. A deeper analysis is needed to understand what factors influence intentions and actions. The theory of planned behavior asserts that people think first (intend) and then act. This theory has been successfully applied to predicting actions in a wide variety of decisions and outcomes, including losing weight (Ajzen, 1991) and computer resource center usage by business students (Taylor and Todd, 1995). In the theory of planned behavior, attitudes, perceived behavioral control, self-efficacy, and behavioral norms are all dependent variables of intent to act, which in turn is a dependent variable to actual behavior. In this paper, we examine its usefulness for predicting how people intend to react (with respect to their employment and investment strategies) to a perceived national economic crisis. In a meta-study of the link between intent and action, Sheppard, et al. (1988) found the link between these two variables to be both significant and robust in size. The rest of the paper is organized as follows: relevant literature concerning the theory of planned behavior is reviewed. Next the research model is presented, the methodology is described, and the results are analyzed. Finally, the findings are discussed, along with implications for economists and future avenues for research are presented.

LITERATURE REVIEW

Neoclassical economic theory assumes "bounded rationality," meaning that individuals almost always weigh their opportunity costs and choose an action that will increase their utility. Only occasionally will individuals make impulse decisions. Fishbein and Ajzen's (1975) theory of reasoned action predicts that subjective norms and attitudes are good predictors of intent, which in turn predicts behavior. Sheppard et al. (1988) analyzed 86 Theory of Reasoned Action studies, finding an average correlation of over 0.53 between intention and behavior. Relying on this work, the correlation between intent and action is acknowledged, but not tested, here. The theory of reasoned action evolved into the theory of planned behavior, which adds self-efficacy as a cause of intent (Ajzen, 1985 and Ajzen, 1991). This paper compares the relationships of one traditional dependent variable, intent to act, during a global financial crisis according to the theory of planned behavior, as adapted for the specifics of this financial crisis. Additionally, we control for standard demographic variables, which we expect to have no significant effect.

HYPOTHESES AND MODEL DESIGN

Intent to Change Jobs and Intent to Move Money

Intent is the extent to which a person is willing to exert an effort in order to perform a specified behavior (e.g. changing jobs). This paper measures intent to react to the national financial crisis by changing income streams (voluntary employment change) and investment allocation. Respondents were asked for example, on a 5-point scale how true (1= very untrue and 5=very true) was the following statement: "... I intend to move my financial assets from financial markets to cash or "... I intend to move my financial assets from financial markets into banks. …

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