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
Date Written: September 6, 2018
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
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