Are Financial Plans Orchestrated by Mental Accounts? An Empirical Investigation into the Role of Mental Accounting on Personal Financial Planning

32 Pages Posted: 6 Sep 2018

See all articles by Mousumi Mahapatra

Mousumi Mahapatra

Institute of Public Enterprise (IPE)

Jayasree Raveendran

TCS Innovation Labs

Anupam De

National Institute of Technology (NIT), Durgapur

Date Written: September 6, 2018

Abstract

Given the increasing relevance of Behavioral Economics in understanding decisions, this paper has analyzed the role of Mental Accounting (MA) in influencing Personal Financial Planning (PFP) decisions of Indian Households. Using the components put forth by the behavioral life cycle theory, MA variables are identified and validated. Individual tendencies for engaging in PFP are captured through identified dimensions. A significant influence of MA on PFP of investors is being empirically established in the study and the implications for business research are put forth. Using PLS-SEM technique, a structured questionnaire exclusively designed for this purpose has been analyzed on a total of 310 responses. The analysis strategy involved three-stage approach through establishing structural and path relationship between MA and PFP, including second order factoring to corroborate validations.

Keywords: Behavioral Finance, Mental Accounting, Personal Financial Planning, Households, Partial Least Square, Second Order factor

Suggested Citation

Mahapatra, Mousumi and Raveendran, Jayasree and De, Anupam, Are Financial Plans Orchestrated by Mental Accounts? An Empirical Investigation into the Role of Mental Accounting on Personal Financial Planning (September 6, 2018). 2019 Academic Research Colloquium for Financial Planning and Related Disciplines. Available at SSRN: https://ssrn.com/abstract=3245076 or http://dx.doi.org/10.2139/ssrn.3245076

Mousumi Mahapatra (Contact Author)

Institute of Public Enterprise (IPE) ( email )

Shamirpet
Telangana
Hyderabad, Tamil Nadu 500101
India

Jayasree Raveendran

TCS Innovation Labs ( email )

Hyderabad
India

Anupam De

National Institute of Technology (NIT), Durgapur ( email )

M.G. Avenue
Durgapur, West Bengal 713209
India

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