EMOTIONAL Biases as Mediator of Financial Literacy and Investment Decision Behavior of Bank Clients in Davao CITY

Abstract

This study explored the mediating effect of emotional biases on the relationship between financial literacy and investment decision behavior of bank clients in Davao City. A quantitative method employing a descriptive-correlational design and mediation analysis was employed, with 300 banking clients in Davao City as respondents, selected through the snowball sampling technique. Mean, standard deviation, Pearson’s r, mediation analysis, and path plots were used to analyze the study results. Results revealed that bank clients exhibit a high level of investment behavior, with financial literacy playing a significant role in their decision-making. Emotional biases were also high, with loss aversion most dominant, indicating a strong tendency among clients to avoid financial losses. Correlation and mediation analyses confirmed significant relationships among financial literacy and investment decision behavior, emotional biases and investment behavior, and financial literacy and emotional biases. The mediation analysis further revealed a partial mediation effect, indicating that financial literacy influences investment decision behavior both directly and indirectly through emotional biases. These findings emphasize the dual importance of cognitive knowledge and emotional regulation in guiding sound investment decisions. The study concludes that enhancing both financial literacy and emotional intelligence is key to fostering prudent and well-informed investment practices among bank clients.