The effect of financial literacy on the judgment of investors; Expanding the theory of source validity

Document Type : Original Article

Authors

1 M.A, Department of Accounting, Faculty of Humanities and Social Sciences, University of Kurdistan, Sanandaj, Iran.

2 Assisstant Professor, Department of Accounting, Faculty of Humanities and Social Sciences, University of Kurdistan, Sanandaj, Iran.

3 Assistant Professor, Department of Psychology, University of Kurdistan, Sanandaj, Iran

10.22034/cbsj.2024.140511.2652

Abstract

Financial literacy is a crucial factor in investors' successful decision-making. Investors with higher financial literacy can make more informed decisions, reducing risk and increasing profits. Source credibility theory emphasizes the tendency of individuals to trust information from credible sources. Investors with greater financial literacy can better identify reliable financial information sources and make sounder decisions.This research explored the impact of financial literacy (knowledge, attitude, and behavior) on investors' judgment, considering source credibility theory (source bias, source competence, and individual bias). The study employed a descriptive approach and correlational statistics. The target population included capital market participants from Kermanshah, Kurdistan, Hamedan, and Ilam, selected through available sampling. Data were collected through questionnaires and analyzed using structural equation modeling.The findings revealed a significant influence of financial attitude and behavior on investors' judgment, while financial knowledge showed no significant effect. Individuals with a better understanding and appreciation of financial decision-making concepts and stronger personal values related to various financial concepts are more adept at analyzing and evaluating investment risks and opportunities, leading to better judgment. Source credibility theory, as a moderating variable, played a significant role in the association between financial literacy and investors' judgment.

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References

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Consumer Behavior Studies Journal
Volume 12, Issue 2
September 2025
Pages 32-17

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