CC BY
443
DOI 10.18551/rjoas.2020-03.16
THE EFFECT OF INVESTMENT EDUCATION AND INVESTMENT EXPERIENCE ON INVESTMENT DECISION WITH FINANCIAL KNOWLEDGE AS INTERVENING
VARIABLE
Subagio Hani, Satoto Shinta Hem*, Ediningsih Sri Isworo, Lecturers Faculty of Economic and Business, FEB UPN "Veteran" Yogyakarta, Indonesia *E-mail: shintaherusatoto@gmail.com
ABSTRACT
This research aims to explain the influence of investment education and investment experience on investment decision with financial knowledge as intervening variables. This research was conducted on college students who have invested in the capital market with 229 respondents. Used four variables, the data collected tested using path analysis. This study shows that investment education and investment experience have a positive effect on investment decision. This study also investigates the indirect effect between investment education and investment experience on investment decision through financial knowledge. The result shows that the direct effect is stronger than indirect effect on the influence of investment education and investment experience on investment decision. The higher the investment decision and investment experience of the college students, the better the financial knowledge of the students in making investment decision.
KEY WORDS
Investment education, investment experience, financial knowledge, investment decision.
Investment is a form of investment made by investors to get profits. In general, investors make investments with the aim of improving the quality and welfare of life through the benefits obtained. During its development, public interest in Indonesia is still very minimal, especially to invest in the capital market. As of the end of March 2016, 64% of the shareholding in the Indonesian capital market was still dominated by foreign investors (PT Kustodian Sentral Efek Indonesia, 2016). The lack of interest from domestic investors could be due to the low understanding and knowledge of the public regarding investments in the Indonesian capital market.
Basic knowledge about investing is very important for investors, especially for novice investors. Sufficient knowledge of investment will prevent investors from the risk of loss and can avoid irrational investment practices so that the objective of investing in the capital market will be achieved. With adequate knowledge, investors will also be able to analyze which effects will be purchased so that they are in accordance with the expected returns of investors.
In an effort to increase investor interest in investing in the capital market, the government through the Indonesia Stock Exchange conducted various programs to attract new investors, including the "Let's Save Stock" campaign program. This campaign aims to motivate, educate and develop the capital market industry, as well as adding new investors to young generation students, students, and young employees. The Indonesia Stock Exchange also increased cooperation with universities by establishing an Investment Gallery at the University. This is expected to make it easier for students and young investors in general to get to know and conduct transactions in the capital market.
Students have considerable potential to become new investors in the capital market. Although they do not have their own income, the interest of students to invest in the capital market is quite high. To support this, the Indonesia Stock Exchange also issued a regulation that the public can open a stock account with a minimum deposit of Rp 100,000.00 in a securities company by registering at the Investment Gallery. With these Rp 100,000.00 funds, investors can get 1 lot of shares at a price of Rp 1,000 per share. The investment offered is in the form of shares and mutual funds. In this way, it is hoped that students can
more easily invest and have the perception that investing in the capital market does not require large capital.
Encouragement for students to get involved as investors in the capital market, basically also supported by the University with the large amount of education provided in lecture activities. In addition to compulsory courses in Investment Management and Financial Management for students majoring in Management, various activities were also held in collaboration with securities companies and the Indonesia Stock Exchange, including the establishment of a stock exchange corner as a learning medium, various investment motivational seminars, and investment classes for students. However, various obstacles still often arise that make students less motivated in investing in the capital market even though they have adequate basic knowledge about the capital market.
This study seeks to determine the factors that influence student investment decisions in the capital market. This aims to further explore what factors are the basis for student investment decisions because the knowledge and education that is obtained by students often do not provide sufficient motivation for students to become investors in the capital market.
LITERATURE REVIEW
Investment is an activity of placing a number of funds in one or more assets during a certain period in the hope of earning an income or increasing the value of an investment in a future time period. The purpose of investors to invest is to obtain a profit or rate of return. Returns from shares can be in the form of capital gains (the difference between the selling price and the purchase price) and dividend yield. The return is an indicator of the success or failure of an investment; if successful it will increase the welfare of investors. Therefore investors need to set expected returns, taking into account various information for investment decision making.
Investment decisions are an important factor in the financial function, that the value of the company is solely determined by investment decisions. The statement implies that investment decisions are important. Related to the importance of investment, investment decision making must be managed so that it produces optimal investment decisions. An optimal investment decision can be reached if the investor makes the right decision. The right decision is a decision that is in accordance with the effect of events on the company's value. One component that shapes a company's value (reflected in its share price) is investor sentiment, namely investor confidence in the company's cash flow in the future that is not supported by accounting information (fundamental).
Investment decision making by individual investors is often based on personal factors such as education (learning). Education is one of the factors considered in investment decision making (Lubis, et al., 2013). Individual investors have different levels of education so they have different levels of understanding in investment decisions. The higher the level of one's education, an investor will have a better understanding in choosing stocks in his investment that will produce optimal returns and avoid risk. The higher the education level of a person, the more tolerant these investors will be to the risk of investment decisions (Schooley and Wooden, 1999). Sekolah Pasar Modal (SPM) and Sekolah Pasar Modal Syariah (SPMS) are capital market education and socialization programs that are held regularly by the Indonesia Stock Exchange. The education program conducted by the BEI is expected to help increase public knowledge about investment activities in the capital market.
Investment planning is influenced by previous investment experience and forecasting profit opportunities in the future. In making plans, investors will look for opportunities to get the expected return with risks that must be faced from various investment opportunities. Gveroski and Jankuloska (2017) state that experience is one of the determining factors in the implementation of financial management. Lack of experience can lead to lack of planning for new investors, lack of skills due to insufficient skills as a result of the low utilization of knowledge in decision making practices. Past experience, training, learning, and the right skills will greatly help investors in making investment decisions. Experience in business will
also influence investment decisions (Yohson, 2008). This experience will create people who dare to invest in high-risk investments, and will take into account various risks that may be faced when making investment decisions. So, it can be said that the more experience, someone will tend to choose the type of high-risk investment to get a greater return because they already have enough experience in decision making (Kalsum, et al., 2018)
Financial knowledge or often referred to as financial literacy is a process or activity to enhance the knowledge, trust and skills of consumers and the wider community so that they are able to manage their finances better (Otoritas Jasa Keuangan, 2013). According to Kim (2001), financial literacy is the basic knowledge needed by a person which includes knowledge and understanding of the principles of savings, savings, and investment. Lusardi and Mitchell (2007) describe financial literacy as the knowledge one has about financial instruments, including one's knowledge of savings or savings, insurance, investment, and other financial instruments. In this case, financial literacy can be interpreted as financial knowledge with the aim of achieving prosperity.
STUDY FRAMEWORK AND HYPOTHESIS
To understand the effect of investment education and investment experience on investment decision making directly or indirectly through financial knowledge, the following frameworks and hypotheses are formulated:
Figure 1 - The Effect of Investment Education and Investment Experience on Investment Decision
with Financial Literacy as an intervening variable
Relationships in the framework of thought are hypothesized as follows: H1: Investment education has a positive effect on investment decisions; H2: Investment experience has a positive effect on investment decisions; H3: Investment education and investment experience have a positive effect on investment decisions through financial knowledge.
METHODS OF RESEARCH
This study is a quantitative study that aims to examine the effects of investment education and investment experience on investment decisions with financial knowledge as intervening variables. The population in this study were all students who had invested in the capital market. As for the sample in this study were some of the population that met the criteria, namely students who had and were still actively investing through the Investment Gallery of various universities in Yogyakarta as many as 229 respondents.
Data collection was carried out by distributing questionnaires consisting of 24 question items representing 4 variables, consisting of 8 question items for financial knowledge variables, 4 question items for investment education variables, 4 question items for investment experience and 8 question items for investment decision variables.
The data used in this study are investment education and investment experience (independent variable), investment decision (dependent variable) and financial knowledge (intervening variable).
Investment education is a process in which a person increases his knowledge related to investment through various processes that make him have a better understanding of investment issues. Investment education is measured using indicators: 1) the importance of capital market socialization, 2) the importance of investment learning, 3) the importance of capital market schools, 4) education for new investors.
Investment experience is an event experienced by individuals in many transactions with careful consideration. Investment experience is measured using indicators: 1) experience of investing in a bank account, 2) experience of investing in the capital market, 3) experience of facing risk, 4) investment benefits.
Investment decisions are considerations made by an investor in choosing certain types of investments to benefit in the future. Indicators used to measure investment decisions: 1) corporate self-image, 2) financial information, 3) reference information, 5) company stock position, 6) economic indicators, 7) recommendations on the company, 8) investment objectives.
Financial literacy is defined as the knowledge, skills, and attitudes that influence behaviour in improving the quality of decision making and financial management to prosper. Financial knowledge is measured using indicators: 1) investment product, 2) money management, 2) financial planning, 3) financial well-being, 4) company profile, 5) changes in stock price, 6) economic indicators, 7) investment risk, 8) return
The data collected will be tested using the regression analysis to testing the influence of investment education and investment experience on investment decision and from the results obtained later conclusions will be drawn. To test the direct and indirect effect of investment experience toward investment decision trough financial knowledge, the path analysis was conducted. Path analysis is the part of the regression analysis used to analyze the relationship between dependent variable with independent variable directly or indirectly through one or more intermediaries. The path calculation describes the influence of Investment Education (X1) and Investment Experience (X2) directly and indirectly to Investment Decision (Y2) through Financial Knowledge (Y1).
The structural equation used is as follows:
Z = p1X1+p2X2+e1 sub structural (1)
Y = P1X1+ p2X2+p3Z + e2 sub structural (2)
RESULTS OF STUDY
Table 1 below shows descriptive statistics from research respondents. 52% of respondents were male while the rest were female. The majority of respondents aged at 18 years.
Table 1 - Characteristics of respondent
Gender Number of Respondents %
Male 120 52
Female 109 48
Total 229 100.00
Age Number of Respondents %
17 year 12 5,2
18 year 101 44
19 year 80 35
20 year 21 9,2
>20year 15 6,6
Total 229 100.00
Faculty Number of Respondents %
Business and Economy 135 59,2
Industry 92 40
Law 1 0,4
Communication 1 0,4
Total 229 100.00
Validity and reliability tests are carried out on the questions / questionnaires so that the data from the questionnaire to be distributed has valid and reliable results. Validity test is done to measure the validity or validity of a questionnaire. Validity test is done by using the correlation test between the score of question items with the total construct score. If the correlation between each indicator scores against the total construct score shows a significant result, then each question indicator is valid. The reliability test is used to measure a questionnaire which is an indicator of a variable or construct. A questionnaire is said to be reliable if one's answer to the question is consistent. Reliability test is done by looking at the Cronbach Alpha value of a construct. If the construct has a Cronbach Alpha value> 0.60, then the construct or variable is said to be reliable. The results of testing the validity and reliability are shown in table 2.
Table 2 - Descriptive Variables and Test Results for Validity and Reliability
Variable Pearson Correlation Significant Information Cronbach's Alpha Information
Y1.1 ,750 ,000 Val d 0,684 Reliable
Y1.2 ,585 ,001 Val d
Y1.3 ,417 ,022 Val d
Y1.4 ,220 ,043 Val d
Y1.5 ,693 ,000 Val id
Y1.6 ,648 ,000 Val id
Y1.7 ,517 ,003 Val id
Y1.8 ,592 ,001 Val id
X1.1 ,746 ,000 Val id 0,736 Reliable
X1.2 ,837 ,000 Val id
X1.3 ,766 ,000 Val id
X1.4 ,755 ,000 Val id
X2.1 ,847 ,000 Val id 0,739 Reliable
X2.2 ,859 ,000 Val id
X2.3 ,713 ,000 Val id
X2.4 ,606 ,000 Val id
Z1.1 ,523 ,003 Val id 0,734 Reliable
Z1.2 ,626 ,000 Val id
Z1.3 ,603 ,000 Val id
Z1.4 ,563 ,001 Val id
Z1.5 ,705 ,000 Val id
Z1.6 ,653 ,000 Val id
Z1.7 ,646 ,000 Val id
Z1.8 ,577 ,001 Val id
The results of the validity test in the table show that the correlation between each indicator score with the total construct score shows significant results. So it can be concluded that each question indicator is valid. The reliability test results show that all variables have a Cronbach Alpha value greater than 0.60. This shows that the investment decision variables, financial knowledge, investment education and investment experience are said to be reliable.
Testing the effect of investment education and experience investment on investment decisions shows that investment education and investment experience has a positive effect on investment decisions (table 3). These results prove that the higher investment and investment experience partially, the better their investment decision.
Table 3 - Summary the Path Analysis and Hypothesis Testing
Model Path Coefficient t statistic P-value Empirical Evidence
Substructural X^ Y
0,209 3,529 0,001* Significant Accepted
X2^Y 0,165 2,694 0,008* Significant Accepted
Substructural X^ Z^ Y
X1^Z 0,115 1,732 0,085** Significant Accepted
X2^Z 0,287 4,344 0,000* Significant Accepted
Z^ Y 0,370 6,251 0,000* Significant Accepted
*Sign a = 0,05; **Sign a = 0,10.
The test results in table 2 show that investment education has a positive effect on investment decisions with a value of the path coefficient of investment education of 0.115, significant at 0.085. This shows that investment education has a positive effect on investment decisions, so hypothesis 1 is accepted. Likewise for testing the investment experience variable, the results show that investment experience has a positive effect on investment decisions with a path coefficient of 0.287, significant at 0,000. This shows that investment experience has a positive effect on investment decisions. So hypothesis 2 is accepted
Testing the influence of financial knowledge on investment decisions shows that financial knowledge has a positive effect on investment decisions with a path coefficient of 0.370 significant at 0,000. This shows that investors with high financial knowledge have a strong influence on investment decision making
Testing the indirect effect of investment education and investment experience on investment decisions through financial knowledge shows that investment education has a positive effect on financial knowledge as indicated by a path coefficient of 0.209, significant at 0.001. This shows that the better education of one's investment will affect one's financial knowledge. While the results of investment experience testing show that investment experience has a positive effect on financial knowledge with a path coefficient of 0.165, significant at 0.008. This means that the more investment experience a person has will strengthen his financial knowledge.
The magnitude of the indirect effect of investment education on investment decisions through financial knowledge is known as (0.290x 0.370) = 0.07733. While the magnitude of the indirect effect of investment experience on investment decisions through financial knowledge is known as (0.290x 0.370) = 0.0615. So it can be concluded that the direct effect of investment education and investment experience on investment decisions is greater than the indirect effect through financial knowledge. Thus hypothesis 3 is accepted.
DISCUSSION OF RESULTS
The test results show that investment education has a positive effect on investment decisions. An investor's investment decisions are often based on personal factors, one of which is education. Education is one of the factors considered in investment decisions. Individual investors have different levels of education so that it can be understood if different levels of education of a person will produce various investment decisions (Obamuyi, 2013). Investors with a high level of education will better understand how to have investment products that will provide optimal returns and avoid risk. A high level of education will make investors have a greater tolerance level for investment risk. This research is in line with Joseph and Ali's (2015) and Umar's (2019) research which proves that investment education has a positive effect on investment decisions.
Investment experience influences investment decisions. This means that the more experience someone has in investing will be very influential in making one's investment decisions. The experience factor has an important role in the ability or competence of the investor. Heath and Tversky (2013) state that the experience factor is one of the factors that influence investor competence in stock trading. Investors with a lot of investment experience indicate that these investors have better ability in making decisions in betting transactions compared to inexperienced investors. This is because experienced investors have the knowledge in dealing with various situations that might occur. (Kalsum et al., 2018). Ellis (2006) states that the better a person understands himself as an investor and the better their understanding of the securities market will make an investor better understand the combination of long-term assets that are very necessary in forming a portfolio. Good understanding and sufficient education along with the experience possessed in terms of investments will make an individual wiser in making investment decisions to achieve goals in the future. The results of this study support the research of Yohson (2008), Chang and Ting (2010), and Kalsum, et.al (2018) which states that investment experience influences investment decisions.
This study also shows the indirect influence of investment education and investment experience on investment decisions through financial knowledge. Investment education and investment experience supplemented with financial knowledge will make investors more careful in making investment decisions. Investors will pay attention to various risks that may be faced and strive to be able to obtain optimal returns in choosing investment products and forming investment portfolios. Investors will also be more careful in managing their funds and strive to become an intelligent investor in managing their investment activities.
The results of this study are consistent with the study of Fachrudin (2016) that shows the positive influence of investment education on investment decisions, and the positive influence of investment experience on investment decisions, both directly and through financial knowledge.
CONCLUSION
Based on the results of the study it can be concluded that: 1) investment education has a positive effect on investment decisions. This means that the investment learning process that has been passed will increase the ability of student investors in making investment decisions. 2) Investment experience has a positive effect on investment decisions. This means that the various experiences gained by students in the learning process and transactions in the capital market will help students in making investment decisions. In addition, investment experience will make student investors have the ability to calculate various risks that may be faced in an investment. 3) Investment education and investment experience influence investment decisions through financial knowledge. Investment knowledge will strengthen the influence of education and investment experience owned by investors in making investment decisions. This proves that extensive financial knowledge will be indispensable in supporting education and investment experience they have to make better investment decisions.
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