Financial Literacy and other Factors Influencing Individuals’ Investment Decision: Evidence from a Developing Economy (Pakistan)

Abstract

This study is aimed at assessing the financial literacy of the individual investors in Pakistan. In addition, it examines the relationship between financial literacy and the influence of the factors that affect the investment decision.  A modified questionnaire has been used to collect the data containing questions related to demography of the investors, factors affecting the investment decisions and financial literacy level of the individual investors at Karachi Stock Exchange the biggest exchange of Pakistan. The data was collected from 154 respondents. The results indicate that the financial literacy level of the investors is below average. There is a significant difference in financial literacy was found between the respondents regarding age, gender, work activity and marital status of the respondents. Finally, the results indicate that there is a negative significant impact of financial literacy on the sum of investment factors at 10% significant level. The most affecting factor is condition of financial statements and Firm status in industry. The current study is being done for the first time in Pakistan.

Keywords: Financial information, Literacy, Investments, Investors, Karachi Stock Exchange

JEL Classification: G02, G11