Malaysian Individual Investors: What Are the Factors That Influence Their Financial Statement Usage?
Main Article Content
Research aim: This study seeks to examine the knowledge and attitudinal factors that influence financial statement usage among Malaysian individual investors.
Design/ Methodology/Approach: A survey was conducted on a sample of 399 Malaysian individual investors using self-administered questionnaires.
Research finding: The findings reveal that financial statement usage is positively associated with subjective norm, financial statement knowledge, attitude towards financial statement usage, and perceived behavioural control. However, it is negatively associated with trading frequency attitude.
Theoretical contribution/Originality: This study seeks to contribute to the very limited research on the factors that influence individual investors’ financial statement usage. Additionally, it enriches the literature on financial statement usage among individual investors in Malaysia by showing the extent to which the three main financial statements are utilised by them. Furthermore, this research extends financial literacy research on stock investing to the realm of financial statement usage by highlighting the influence of financial statement knowledge on this behaviour. Thus, the study seeks to bridge the gap between financial reporting and financial literacy.
Practitioner/Policy implication: The findings provide useful insights for the providers of investor education programmes in developing more holistic programmes.
Research limitation/Implication: Non-random sampling was employed in this study, albeit such an approach is consistent with the literature. Also, respondents comprised individual investors who are proficient in English because the researchers seek to complement Malaysian studies on the readability of English language financial statement narratives.
Keywords: Financial Reporting, Investment Decision-making, Financial Knowledge
Type of manuscript: Research paper
JEL Classification: M41, G41, D80
The Asian Journal of Accounting Perspectives (AJAP) articles are published under a licence equivalent to the Creative Commons Attribution-NonCommercial-NoDerivs License (CC BY-NC-ND). The licence allows users to copy, distribute, and transmit an article as long as the author is attributed. The article is not used for commercial purposes. The work is not modified or adapted in any way.
Authors are required to sign the Exclusive License to Publish agreement upon publication in the AJAP. The agreement grants the Publisher (Faculty of Business and Accountancy, Universiti Malaya) to publish and disseminate the articles.
Articles published in the AJAP are digital, online, free of charge, and free of most copyright and licensing restrictions.
Article Processing Charge
Articles publish in AJAP is free submission, production and publication charges. However, all accepted articles are required for language editing. The AJAP officially appointed and outsourced proofreader will conduct this process, and the authors will cover the cost. AJAP does not profit from this process and transaction.
Abdul Raman, S., Mohd Shaari, S. N., & Mahmud, N. M. (2012). A longitudinal study of the readability of the chairman’s narratives in corporate reports: Malaysian evidence. International Journal of Social, Education, Economics and Management Engineering, 8(7), 2011-2018.
Abreu, M., & Mendes, V. (2010). Financial literacy and portfolio diversification. Quantitative Finance, 10(5), 1-38.
ACCA (2012). Re-assessing the value of corporate reporting. London, United Kingdom: ACCA.
Agarwalla, S. K., Barua, S. K., Jacob, J., & Varma, J. R. (2013). Financial literacy among working young in urban India. Ahmedabad, India: Indian Institute of Management Ahmedabad.
Ajzen, I. (1991). The theory of planned behavior. Organizational Behavior and Human Decision Processes, 50, 179-211.
Ajzen, I. (2006). Constructing a TpB questionnaire: Conceptual and methodological considerations. Retrieved from http://www.uni-bielefeld.de/
Ajzen, I. (2011). Constructing a theory of planned behaviour questionnaire. Retrieved from http://people.umass.edu/
Ajzen, I., Joyce, N., Sheikh, S., & Cote, N. G. (2011). Knowledge and the prediction of behavior: The role of information accuracy in the theory of planned behavior. Basic and Applied Social Psychology, 33, 101–117.
Al-Ajmi, J. (2009). Investors’ use of corporate reports in Bahrain. Managerial Auditing Journal, 24(3), 266-289.
Alessie, R., van Rooij, M., & Lusardi, A. (2011). Financial literacy and retirement preparation in the Netherlands. Journal of Pension Economics and Finance, 10(4), 527-545.
Ali, A., Rahman, M. S. A., & Bakar, A. (2015). Financial satisfaction and the influence of financial literacy in Malaysia. Social Indicators Research, 120(1), 137-156.
Arora, S., & Marwaha, K. (2013). Financial literacy level and awareness regarding stock market. An empirical study of individual stock investors of Punjab. Management and Labour Studies, 38(3), 241-253.
Aruna, P. (2017, May 3). More young investors entering into Malaysian market. The Star. Retrieved from https://www.thestar.com.my/
Asaad, C. T. (2015). Financial literacy and financial behavior: Assessing knowledge and confidence. Financial Services Review, 24(2), 101-117.
Atkinson, A., & Messy, F. A. (2012). Measuring financial literacy: Results of the OECD/International Network on Financial Education (INFE) pilot study. OECD Working Papers on Finance, Insurance and Private Pensions No. 15, 1-73.
Babiarz, P., & Robb, C. A. (2014). Financial literacy and emergency saving. Journal of Family and Economic Issues, 35(1), 40-50.
Barber, B. M., Lee, Y.-T., Liu, Y.-J., & Odean, T. (2009). Just how much do individual investors lose by trading? The Review of Financial Studies, 22(2), 609-632.
Barber, B. M., & Odean, T. (2000). Trading is hazardous to your wealth: The common stock investment performance of individual investors. The Journal of Finance, 55(2), 773-806.
Barber, B. M., & Odean, T. (2008). All that glitters: The effect of attention and news on the buying behavior of individual and institutional investors. The Review of Financial Studies, 21(2), 785-818.
Barber, B. M., & Odean, T. (2013). The behavior of individual investors. In G. M. Constantinides, M. Harris & R. M. Stulz (Eds.), Handbook of the Economics of Finance (p. 1533-1570). Amsterdam: Elsevier B.V.
Beattie, V., Dhanani, A., & Jones, M. J. (2008). Investigating presentational changes in U.K. annual reports: A longitudinal perspective. Journal of Business Communication, 45(2), 181-222.
Behrman, J. R., Mitchell, O. S., Soo, C. K., & Bravo, D. (2012). How financial literacy affects household wealth accumulation. The American Economic Review, 102(3), 300-304.
Ben-David, I., & Hirshleifer, D. (2012). Are investors really reluctant to realize their losses? Trading responses to past returns and the disposition effect. The Review of Financial Studies, 25(8), 2485-2532.
Brennan, N. M., Pierce, A., & Guillamon-Saorin, E. (2009). Impression management. Accounting, Auditing and Accountability Journal, 22(5), 789-832.
Brimble, M., & Hodgson, A. (2007). On the intertemporal value relevance of conventional financial accounting in Australia. Accounting and Finance, 47, 599-622.
Bursa Malaysia. (2016). Opening of CDS account. Retrieved from http://customer.bursamalaysia.com/
Callen, J. L., Lai, K. M. Y., & Wei, S. X. (2016). The volatility of return revisions and financial statement literacy in emerging markets: The case of cross-listed Chinese firms. Journal of Business Finance and Accounting, 43(5 & 6), 572-596.
Carpenter, T. D., & Reimers, J. L. (2005). Unethical and fraudulent financial reporting: Applying the theory of planned behavior. Journal of Business Ethics, 60(2), 115-129.
Chen, P., & Zhang, G. (2007). How do accounting variables explain stock price movements? Theory and evidence. Journal of Accounting and Economics, 43, 219-244.
Chung, Y., & Park, Y. (2014). The effects of financial education and networks on business students' financial literacy. American Journal of Business Education, 7(3), 229-236.
Clark, R., Lusardi, A., & Mitchell, O. S. (2014). Financial knowledge and 401(k) investment performance. GFLEC Working Paper Series No. 2014-1, 1-27.
Companies Act 2016 (2016). Malaysian Law. Retrieved from http://www.agc.gov.my/
Creswell, J. W. (2014). Research design (4th ed.). Singapore: SAGE Publications Inc.
De Zoysa, A., & Rudkin, K. (2010). An investigation of perceptions of company annual report users in Sri Lanka. International Journal of Emerging Markets, 5(2), 183-202.
Delavande, A., Rohwedder, S., & Willis, R. (2008). Preparation for retirement, financial literacy and cognitive resources University of Michigan Retirement Center Working Paper No. 2008-190, 1-47.
Dennis, B. S., Buchholtz, A. K., & Butts, M. M. (2009). The nature of giving. A theory of planned behavior examination of corporate philanthropy. Business and Society, 48(3), 360-384.
Dontoh, A., Radhakrishnan, S., & Ronen, J. (2004). The declining value-relevance of accounting information and non-information-based trading: An empirical analysis. Contemporary Accounting Research, 21(4), 795–812.
Drake, M. S., Roulstone, D. T., & Thornock, J. R. (2016). The usefulness of historical accounting reports. Journal of Accounting and Economics, 61, 448-464.
Fowler, F. J. (2009). Survey research methods (4th ed.). Thousand Oaks, CA: Sage.
Francis, J., & Schipper, K. (1999). Have financial statements lost their relevance? Journal of Accounting Research, 37(2), 319-352.
Gopi, M., & Ramayah, T. (2007). Applicability of theory of planned behavior in predicting intention to trade online. International Journal of Emerging Markets, 2(4), 348-360.
Graham, B., & Dodd, D. (2009). Security analysis (6th ed.). New York, NY: McGraw-Hill.
Graham, B., & Zweig, J. (2006). The intelligent investor. New York, NY: Harper.
Graham, J. R., Harvey, C. R., & Huang, H. (2009). Investor competence, trading frequency, and home bias. Management Science, 55(7), 1094-1106.
Grinblatt, M., & Keloharju, M. (2009). Sensation seeking, overconfidence, and trading activity. The Journal of Finance, 64(2), 549-578.
Helppie, B., Kapinos, K. A., & Willis, R. J. (2010). Occupational learning, financial knowledge, and the accumulation of retirement wealth. University of Michigan Retirement Research Center Working Paper No. 2010-237, 1-39.
Hermanus, B. (2015, April 1). Analysis: Comparing RI financial market with other ASEAN countries The Jakarta Post. Retrieved from http://www.thejakartapost.com/
Howlett, E., Kees, J., & Kemp, E. (2008). The role of self-regulation, future orientation, and financial knowledge in long-term financial decisions. The Journal of Consumer Affairs, 42(2), 223-242.
Hrasky, S., Mason, C., & Wills, D. (2009). The textual complexity of annual report narratives: A comparison of high- and low-performance companies. New Zealand Journal of Applied Business Research, 7(2), 31-45.
Hung, A. A., Parker, A. M., & Yoong, J. K. (2009). Defining and measuring financial literacy. RAND Labor and Population Working Papers, WR-708, 1-26.
Huston, S. J. (2010). Measuring financial literacy. The Journal of Consumer Affairs, 44(2), 296-316.
Ibrahim, D., Harun, R., & Isa, Z. M. (2009). A study on financial literacy of Malaysian degree students. Cross-cultural Communication, 5(4), 51-59.
Israelov, R., & Katz, M. (2011). To trade or not to trade? Informed trading with short-term signals for long-term investors. Financial Analysts Journal, 67(5), 23-36.
Jaiyeoba, H. B., & Haron, R. (2016). A qualitative inquiry into the investment decision behaviour of the Malaysian stock market investors. Qualitative Research in Financial Markets, 8(3), 246-267.
Jamal, A. A. A., Ramlan, W. K., Pazim, K. H., & Budin, D. S. A. (2014). Decision-making style and investment success of retail investors in Malaysia. International Journal of Business and Social Science, 5(1), 311-322.
Jappelli, T., & Padula, M. (2011). Investment in financial literacy and savings decisions.CFS Working Paper No. 2011/07, 1-41.
Johansen, T. R., & Plenborg, T. (2013). Prioritising disclosures in the annual report. Accounting and Business Research, 43(6), 605–635.
Jones, M. J., & Shoemaker, P. A. (1994). Accounting narratives: A review of empirical studies of content and readability. Journal of Accounting Literature, 13, 142.
Khan, M. T. I., Tan, S.-H., & Chong, L.-L. (2016). Gender differences in preferences for firm characteristics across different groups of investors. Qualitative Research in Financial Markets, 8(1), 2-15.
Klapper, L., Lusardi, A., & van Oudheusden, P. (2015). Financial literacy around the world: Insights from the Standard and Poor's ratings services global financial literacy survey. Retrieved from http://gflec.org/
KPMG (2011). Disclosure overload and complexity: Hidden in plain sight. Retrieved from https://www.kpmg.com/
Kumar, A. (2009). Hard-to-value stocks, behavioral biases, and informed trading. The Journal of Financial and Quantitative Analysis, 44(6), 1375-1401.
Lai, M.-M., Low, K. L. T., & Lai, M.-L. (2001). Are Malaysian investors rational? Journal of Psychology and Financial Markets, 2(4), 210-215.
Lai, M.-M., Tan, S.-H., & Chong, L.-L. (2013). The behavior of institutional and retail investors in Bursa Malaysia during the bulls and bears. Journal of Behavioral Finance, 14(2), 104-115.
Landerretche, O. M., & Martinez, C. (2013). Voluntary savings, financial behavior, and pension finance literacy: Evidence from Chile. Journal of Pension Economics and Finance, 12(3), 251-297.
Lease, R. C., Lewellen, W. G., & Schlarbaum, G. G. (1974). The individual investor: Attributes and attitudes. The Journal of Finance, 29(2), 413-433.
Libby, R. (1975). The use of simulated decision makers in information evaluation. The Accounting Review, 50(2), 475-489.
Libby, R., Bloomfield, R., & Nelson, M. W. (2002). Experimental research in financial accounting. Accounting, Organizations and Society, 27, 775-810.
Linnainmaa, J. T. (2011). Why so (some) households trade so much? The Review of Financial Studies, 24(5), 1630-1666.
Loke, Y. J. (2015). Financial knowledge and behaviour of working adults in Malaysia. Margin - The Journal of Applied Economic Research, 9(1), 18-38.
Loughran, T., & McDonald, B. (2014). Regulation and financial disclosure: The impact of plain English. Journal of Regulatory Economics, 45(1), 94-113.
Lusardi, A., & Mitchell, O. S. (2011). Financial literacy around the world: an overview. NBER Working Papers Series No. 17107, 1-17.
Lusardi, A., & Mitchell, O. S. (2014). The economic importance of financial literacy: Theory and evidence. Journal of Economic Literature, 52(1), 5-44.
Lusardi, A., Mitchell, O. S., & Curto, V. (2014). Financial literacy and financial sophistication in the older population. Journal of Pension Economics and Finance, 13(4), 347-366.
Malaysian Accounting Standards Board. (2011). The conceptual framework for financial reporting. Kuala Lumpur, Malaysia: Malaysian Accounting Standards Board.
Miller, B. P. (2010). The effects of reporting complexity on small and large investor trading. The Accounting Review, 85(6), 2107-2143.
Ministry of Education Malaysia. (2016). Quick facts 2016.Malaysia educational statistics. Putrajaya, Malaysia: Ministry of Education Malaysia.
Mohammad, R. & Abdul Rhaman, A. (2006). Readability of corporate annual reports of top 100 Malaysian companies. Malaysian Management Journal, 10(1&2), 33-47.
Monticone, C. (2010). How much does wealth matter in the acquisition of financial literacy? The Journal of Consumer Affairs, 44(2), 403-422.
Moser, A. K. (2015). Thinking green, buying green? Drivers of pro-environmental purchasing behavior. Journal of Consumer Marketing, 32(3), 167-175.
Mouna, A., & Jarboui, A. (2015). Financial literacy and portfolio diversification: An observation from the Tunisian stock market. International Journal of Bank Marketing, 33(6), 808-822.
Nagy, R. A., & Obenberger, R. W. (1994). Factors influencing individual investor behavior. Financial Analysts Journal, 50(4), 63-68.
Nik Muhammad, N. M., & Abdullah, M. (2009). Investment decision making style: Are Malaysian investors rational decision makers? Interdisciplinary Journal of Contemporary Research in Business, 1(3), 96-108.
Organisation for Economic Co-operation and Development (OECD) International Network on Financial Education (INFE) (2016). OECD/INFE International survey of adult financial literacy competencies. Paris, France: OECD/INFE.
Pascual-Ezama, D., Scandroglio, B., & Liaño, B. G.G. D. (2013). Can we predict individual investors’ behavior in stock markets? A psychological approach. Universitas Psychologica, 13(1), 25-35.
Phan, K. C., & Zhou, J. (2014). Factors influencing individual investor behavior: An empirical study of the Vietnamese stock market. American Journal of Business and Management, 3(2), 77-94.
Piotroski, J. D. (2000). Value investing: The use of historical financial statement information to separate winners from losers. Journal of Accounting Research, 38(Sup), 1-41.
Poon, M., & Olen, H. (2015). Does literacy improve finance? Public Understanding of Science, 24(3), 272-284.
Psacharopoulos, G. (2006). The value of investing in education: Theory, evidence and policy. Journal of Education Finance, 32(2), 113-136.
Ramayah, T., Mohd. Yusoff, Y., Jamaludin, N., & Ibrahim, A. (2009). Applying the theory of planned behavior (TPB) to predict internet tax filing intentions. International Journal of Management, 26(2), 272-284.
Richardson, S., Sloan, R., & You, H. (2012). What makes stock prices move? Fundamentals vs. investor recognition. Financial Analysts Journal, 68(2), 30-50.
Robb, C. A. (2011). Financial knowledge and credit card behavior of college students. Journal of Family and Economic Issues, 32(4), 690-698.
Robb, C. A., & Woodyard, A. S. (2011). Financial knowledge and best practice behavior. Journal of Financial Counseling and Planning, 22(1), 60-70.
Sabri, M. F., & MacDonald, M. (2010). Savings behavior and financial problems among college students: The role of financial literacy in Malaysia. Cross-cultural Communication, 6(3), 103-110.
Sondari, M. C., & Sudarsono, R. (2015). Using theory of planned behavior in predicting intention to invest: Case of Indonesia. International Academic Research Journal, 1(2), 137-141.
Spataro, L., & Corsini, L. (2013). Endogenous financial literacy, saving and stock market participation. MPRA Paper No. 44342, 1-20.
Stanton, P., & Stanton, J. (2002). Corporate annual reports: Research perspectives used. Accounting, Auditing and Accountability Journal, 15(4), 478-500.
Statman, M., Thorley, S., & Vorkink, K. (2006). Investor overconfidence and trading volume. The Review of Financial Studies, 19(4), 1531-1565.
Tan, H. B., Hoe, S. Y., & Hung, W. T. (2011). Financial literacy and personal financial planning in Klang Valley, Malaysia. International Journal of Economics and Management, 5(1), 149–168.
van Rooij, M., Lusardi, A., & Alessie, J. M. R. (2007). Financial literacy and stock market participation. CFS Working Paper No. 2007/27, 1-46.
Wang, A. (2009). Interplay of investors' financial knowledge and risk taking. Journal of Behavioral Finance, 10(4), 204-213.
Warner, H. W., & Aberg, L. (2006). Drivers’ decision to speed: A study inspired by the theory of planned behavior. Transportation Research (Part F9), 427–433.
Wood, R., & Zaichkowsky, J. L. (2004). Attitudes and trading behavior of stock market investors: A segmentation approach. Journal of Behavioral Finance, 5(3), 170-179.
Worthington, A. C. (2013). Financial literacy and financial literacy programmes in Australia. Journal of Financial Services Marketing, 18(3), 227-240.
Xia, T., Wang, Z., & Li, K. (2014). Financial literacy overconfidence and stock market participation. Social Indicators Research, 119, 1233-1245.
Xu, L., & Zia, B. (2012). Financial literacy around the world: an overview of the evidence with practical suggestions for the way forward. Washington, DC: The World Bank.
Yao, R., & Xu, Y. (2015). Chinese urban households’ security market participation: Does investment knowledge and having a long-term plan help? Journal of Family and Economic Issues, 36, 328-339.
Yeoh, K. (2010). The behaviour of individual investors in Malaysia: A governance perspective. Doctoral thesis, Northumbria University, Northumbria, United Kingdom. Retrieved from http://nrl.northumbria.ac.uk/