Sociodemographic determinants and their influence on investment decisions through financial literacy: Evidence from manufacturing firms in Pakistan

Abstract

We are exploring the effect of sociodemographic determinants influencing investment decisions with the role of financial literacy as a mediator. The correlation between sociodemographic determinants and investment decisions is pivotal for improving financial decision-making within Pakistan's manufacturing sector. Four hundred fifty investors and financially literate employees of manufacturing firms were interviewed by using 5-point Likert scale questionnaires. Structural Equation Modeling (SEM) Technique used, the Partial Least Squares (PLS) method examines both the direct and indirect links among sociodemographic characteristics, financial literacy, and investment choices. The results and analysis indicate that financial literacy positively mediates the association between sociodemographic determinants and investment decision-making; sociodemographic determinants have a considerable effect on financial decisions. Both technical and fundamental analysis could support every investment alternative at hand, avoiding inappropriate decisions in investments. The investor must possess the relevant information, comprehension of data, and skills for a deep understanding of financial perceptions and risks associated with them, for a good understanding of the theories of planned behaviors and rational choices. Financial literacy acts as a mediator between investment decisions and education. Age and Gender associated with significant effects on investment decisions. These findings indicate that financial literacy could be essential for linking sociodemographic determinants with investment decisions. These insights could assist policymakers and financial educators in building financial literacy initiatives to help people make better investing decisions despite sociodemographic inequalities.