Academic journal article Review of Management

Religious Grouping as Predictor of Individual Investment Behaviour

Academic journal article Review of Management

Religious Grouping as Predictor of Individual Investment Behaviour

Article excerpt

Introduction

Investment in the sense of capital formation of capital stock such as land, structure, plant and machinery, furniture and inventory has a crucial role in the economy of any country. Investment is an asset purchased with the hope to generate income or appreciation in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. Investors are those who receive monetary rewards from security trading (Radcliffe, 1997). There are basically two different types of investor namely individual investor and institutional investor. Individual investors mainly include the household investors. The investment made by both type of investors serves its needs and lead to economic growth of the country.

The investment strategies of one investor differ from other as each investor has different perceptions and needs like buying house, planning for retirement and education of children and so on. Individual investor has so many options to invest. These options cater to different needs. These different needs give birth to factors affecting investment decision making which shapes investment behavior of these individuals. There are number of factors which affect an individual's investment decision making. These factors include demographic factors, stock fundamentals, personal values, individual's lifestyle, psychological factors, risk bearing capacity, social and cultural values so on. One important contributing factor affecting investment behavior that attracts little attention is culture, values and religion. Culture, through its components, elements and dimensions, is seen to dictate the organizational structures, the micro-organizational behavior, and the cognitive functioning of individuals, in such a way as to ultimately affect the judgment or decision made (Choi, 2001). Furthermore, values are considered to be general beliefs that define right or wrong (Md Zabid and Ho, 2003). Possibly, therefore, values could affect how individuals perceive the form of behavior considered appropriate and effective in any given state. Several authors have cited culture as one of the powerful determinants of personality formation and behavior of individuals. Religion, being an important aspect of culture, is seen as playing an important job in shaping how people behave in certain situations. Religion affects investment indirectly by shaping demographic characteristics. Religion can also shape action directly both by defining the end values toward which behaviour is oriented and by providing a schema that people draw on to build "strategies of action."

Surprisingly, religions that affect the social and cultural environment in which investors inhabit and perform their individual behaviors are often overlooked. Previous researches suggest that there is an impact of religious affiliation on investment behavior and financial decisions of individuals (Hess, 2012; Muhamad, 2006; Tahir & Brimble, 2011). It is suggested that culture and religion are key social mechanisms for influencing beliefs and behaviours (Kennedy, 1998). Based on these findings, we investigate if religious affiliation influences individual's investment decision making.

Review of Literature

Religion, it is claimed (Sood and Nasu, 1995), would affect individual behaviour directly through the rules and taboos it inspires (Harrell, 1986) and indirectly through categorization of all phenomena, development of code of conduct, and establishment of priorities among these codes (Sood and Nasu 1995). Furthermore, it is argued that religiousness or religiosity, as an important value in the individual's cognitive structure, can influence an individual's behaviour (Delener, 1994). According to him the pro-religious (or highly religious) individuals are likely to be more dogmatic and more conservative than are the non-religious (or least religious) subjects. As such, it is expected that the more religious person would more likely align their behaviour in sync with their religious beliefs and practices. …

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