Mulyadi1, Tri Widyastuti2, Zulkifli3
Sekolah Pascasarjana Universitas Pancasila, Indonesia1,3
Universitas Bhayangkara Jakarta Raya,
Indonesia2
Email: [email protected]
|
Abstract Investment refers to the act of
allocating capital with the expectation of generating a rate of return in the
future. The process of making investment decisions entails a cognitive
assessment that involves choosing one alternative from a range of options
based on available information. Given the highly competitive global business
environment, investors are compelled to thoroughly study and develop their
intuition to make informed investment choices.The objective of this study is
to analyze the determinants influencing Investment Decisions, which are
proxied by Financial Literacy, Financial Behavior, Risk Perception, and
Overconfidence, and their implications on Organizational Performance. The
selection of research subjects in the Jakarta Industrial Estate Pulogadung
area is based on the Government's plan to relocate to Subang, West Java. The
study employs primary quantitative data collected through non-probability
sampling and purposive sampling methods, and utilizes Structural Equation
Model - Partial Least Square (SEM-PLS) analysis with SmartPLS 4 software. The findings of the analysis
reveal that Financial Literacy have negative effect on Investment Decisions.
Conversely, Financial Behavior, Risk Perception, and Overconfidence have
positive effect on Investment Decisions. Additionally, Risk Perception have
positive effect on Organizational Performance. However, Financial Literacy,
Financial Behavior, Overconfidence, and Investment Decisions have no effect on
Organizational Performance. Consequently, it can be inferred that all factors
influencing investment decisions have the capacity to influence
organizational performance, an organization's overall performansce cannot be
solely attributed to its investment decisions, as other factors also come
into play. Keywords: Organization
Performance, Investment Decision, Financial Literacy, Financial Behavior,
Risk Perception, Overconfidence |
INTRODUCTION
The development of the manufacturing industry sub-sector in
Indonesia, especially in Jakarta, experienced very rapid development before
1969. This was marked by the growth of industrial zones in various areas of the
city of Jakarta. To overcome these conditions the regional government decided
to rearrange industrial activities in the Jakarta city area by uniting certain
areas including the Pulogadung area which was used as one of the industrial
areas.
The choice of the Pulogadung area as an industrial area was
due to several main reasons, namely that Pulogadung is very strategically
located, easy to reach by transportation from the Jakarta area and its
surroundings, making it very easy to carry out the process of distributing
goods/services to the area. Based on the Decree of the Governor of DKI Jakarta
Number Ib.3/2/35/1969 concerning 500 Ha of land in Pulogadung. Through this
decree, the Pulogadung area officially owns a land area of 500 hectares. Seen
at that time, the condition of the area was still an unproductive swamp as
agricultural land so it was diverted into an industrial area, with the name
Pulogadung Industrial Zone.
In Indonesia, the Pulogadung Industrial Area is the first
industrial area. This area was originally a project created and managed by the
Regional Government of DKI Jakarta under the name Jakarta Industrial Estate
Pulogadung (JIEP) Project. In line with the development of the industrial area,
the government made adjustments both in terms of institutions and capital. This
is because if JIEP remains a project managed by the regional government of DKI
Jakarta, its legal status is not a business entity so the capital is only made
from the DKI Jakarta government.
To overcome these problems on June 26, 1973, PT Jakarta
Industrial Estate Pulogadung (PT JIEP) was formed to replace the management of
Jakarta Industrial Estate Pulogadung through Notary Deed Number 127 of 1973, to
overcome the problem of own capital regulated by Government Regulation Number
28 of 2010 1973 and Letter of the Governor of the Province of DKI Jakarta
Number D.V-a.3/2/36/73 with the following composition of capital: 50% owned by
the Government of the Republic of Indonesia (Central Government) and 50% owned
by the Provincial Government of DKI Jakarta. On January 24, 2022, the central
government officially handed over 50% of the Company's shares to Danareksa in
an effort to form a NOEs holding that operates across sectors.
An Industrial Estate is a centralized place for industrial
activities equipped with facilities and infrastructure provided. In contrast to
the Industrial Zone which is a centralized place for industrial activities that
is not equipped with adequate facilities and infrastructure. Initially,
industrial estates in Indonesia were only developed by the government through
national-owned enterprises (NOEs), but as the number of companies joining the
industrial estates managed by the government increased reacted to environmental
impacts such as pollution. In addition, there are other problems such as
limited infrastructure and problems with the development of residential areas
because they are close to industrial locations. Along with increasing
investment both from within the country and from abroad, the Government through
Presidential Decree (Keppres) No. 53 dated 27 October 1989 permitted industrial
area businesses to be developed by private parties.
Based on information reported by CNBC Indonesia, it is known
that the industrial area in Pulogadung managed by Jakarta Industrial Estate
Pulogadung (JIEP) will be in danger of disappearing in the future because the
area is no longer sufficient as an industrial area but is more suitable as a
commercial business area. The government plans to relocate these factories to
an industrial area in Subang, West Java by DKI Jakarta Provincial Governor
Decree Number 101 of 2000 concerning regional planning aimed at industries that
have high technology, save land, and save water, do not cause pollution, and
are environmentally friendly. environment. This is related to the existence of
tenants who carry out operations in the industrial area in Pulogadung, Jakarta.
The Pulogadung industrial estate is currently one of several industrial estates
in the DKI Jakarta area, some of which have moved outside the DKI Jakarta area.
The novelty of this research is in all the research variable
instruments Financial Literacy, Financial Behavior, Risk Perception,
Overconfidence, Investment Decision, and Organization Performance. This study
tries to examine the factors that influence investment decisions and their
implications for Organization Performance, which previous studies have never
tried to examine these factors. In addition, this research was conducted at the
research object of the Jakarta Industrial Estate Pulogadung Industrial Estate
to prepare the organization for the government's relocation plan.
Framework and Hypotheses
Figure 1.
Framework
Source: Data
Proceed (2023)
Financial literacy, which encompasses individual knowledge,
understanding, and skills in managing finances, confers significant benefits
when making prudent investment decisions. A high level of financial literacy
facilitates better comprehension of investment concepts and available
instruments. Armed with a comprehensive understanding of diverse investment types,
associated risks, and potential returns, individuals can establish a robust
foundation for making well-informed and astute investment choices.
Proficient financial literacy strengthens individual
capabilities in analyzing and evaluating potential investments. By
comprehending factors that impact investment performance, such as market
conditions, industry trends, and financial statements, individuals can conduct
thorough research and judiciously assess associated risks and opportunities.
Elevated financial literacy enhances an individual's acumen in planning and
managing investment portfolios, as a profound grasp of principles like
diversification, proper asset allocation, and risk management enables optimized
portfolio performance and reduces the impact of potential risks.
A commendable level of financial literacy bolsters
individual confidence in making investment decisions. Armed with substantial
knowledge and understanding, individuals tend to feel more assured in selecting
and managing their investments, leading to rational and sustainable investment
choices.
It is important to acknowledge that financial literacy plays
a pivotal role in effective financial and investment management. Arguments
suggest that a low level of financial literacy can adversely affect investment
decisions. Insufficient comprehension of complex investment concepts and
instruments may hinder individuals from conducting proper analyses and making
intelligent investment decisions. Without adequate knowledge about diverse
investment types, associated risks, and potential returns, individuals may find
themselves ill-equipped to make sound judgments.
Furthermore, a dearth of financial literacy renders
individuals more susceptible to manipulation or investment fraud. Lack of comprehension
concerning investment principles and the ability to identify unauthorized or
dubious investment offers can lead individuals to fall victim to investment
scams, resulting in significant financial losses. Additionally, low financial
literacy can impact individual behavior concerning risk and investment
management. Those lacking a proper understanding of investment risks may either
avoid risk entirely or take disproportionate risks relative to their financial
profile.
Low financial literacy can also affect individual confidence
in making investment decisions.
Uncertainty and lack of understanding can cause individuals to lack
confidence in making investment decisions, which can result in delays or
ineffective decisions. Research conducted by Jariwala (2015), Fachrudin &
Fachrudin (2016), Baihaqqy, et al.
(2020), Rustan (2021), and Sulistyowati, et al. (2022) states that Financial Literacy have effect on Investment Decisions.
H1: Financial Literacy have effect on Investment Decision.
Financial behavior which includes habits and individual
actions in financial management can make a positive contribution to making good
investment decisions. Disciplined and responsible financial behavior can help
individuals manage their finances well. By having prudent spending habits,
prudent debt management, and effective budget management, individuals can
create a solid foundation for making balanced and sustainable investments.
Planned and directed financial behavior can assist in
long-term investment planning. By adopting good planning habits, such as
setting clear investment goals, conducting market research, and weighing risks
and potential returns, individuals can make more informed and rational
investment decisions. Professional and ethical financial behavior can
positively influence investment decisions. By maintaining integrity in
financial management, such as following applicable rules and regulations, and
treating stakeholders fairly and transparently, individuals can build a good
reputation and gain the trust of other parties in the investment context.
Financial behavior which includes habits and individual
actions in financial management can affect investment decision making in an
unfavorable way. Undisciplined or irresponsible financial behavior can hinder
making wise investment decisions. If an individual or organization has a habit
of overspending, poor debt management, or does not consider risk in financial
decisions, this can negatively impact their investment decisions.
Impulsive or unplanned financial behavior can interfere with
the investment decision-making process.
If individuals or organizations tend to make investment decisions based
on emotional impulses or without careful planning, they can fall into
uncontrolled or high-risk investments.
Inaccuracy in decision making can result in significant financial
losses.
Unprofessional or unethical financial behavior can
negatively affect investment decisions.
If individuals or organizations engage in illegal or unethical financial
practices, such as manipulation of information or insider trading, this can
undermine the integrity and trust of the market in their investment decisions.
Research conducted by Arianti (2018), Grohmann (2018), and Rustan (2021) states
that Financial Behavior have effect on Investment Decisions.
H2: Financial Behavior have effect on Investment Decision
Risk perception, namely individual perception or
understanding of the risks associated with investment decisions can make a
positive contribution to making wise investment decisions. A high level of Risk Perception can help
individuals to be more aware of and consider the risks involved in an
investment. By having an in-depth
understanding of the risks that may arise, individuals will tend to carry out a
more mature analysis and take the necessary preventive steps before making
investment decisions.
High risk perception can encourage individuals to conduct
more in-depth research and evaluation of the desired investment. Individuals
who are aware of risk tend to spend time and effort to gather relevant
information, analyze market performance, and consider risk factors that can
affect investment results. This can result in more informed and rational
investment decisions. The high level of risk perception can also help individuals
manage their expectations of investment returns. Individuals who are aware of
risk will be more realistic in setting expectations for the return on their
investment.
Regardless of the profit or return expected by an investor,
investment also has unpredictable risks.
Risks arise due to uncertainties that result in doubts about one's
ability to predict the possibility of results that will occur in the future so
that the level of risk in an investment greatly influences the investment
decisions of investors to decide whether to invest or not (Sulistyowati, et
al., 2022).
A high level of risk perception can influence individuals to
avoid or delay making investment decisions. When individuals have a strong
perception of the risks associated with an investment, they may tend to be very
cautious and reluctant to take risks. A high level of risk perception can
result in excessive uncertainty and excessive analysis in making investment
decisions. Individuals who are overly focused on risk may tend to overestimate
the risks involved, which can cloud their assessment of investment
opportunities and potential returns.
High risk perception can affect emotions and attitudes
towards failure. If the individual has a
high perception of risk, it allows the individual to be more afraid of possible
losses and have a more negative reaction to failure. Research conducted by Sulistyowati, et
al. (2022) states that there is an
influence between Risk Perception on Investment Decisions
H3: Risk Perception have
effect on Investment Decision
Overconfidence which refers to excessive belief or
unrealistic self-assessment can make a positive contribution to Investment
Decisions. Overconfidence can trigger high motivation to take risks. Individuals who are overconfident tend to be
more courageous in making investment decisions that may be considered risky by
others. Overconfidence can increase courage in decision making. Individuals who feel confident and confident
tend to have a more proactive attitude and can make decisions quickly.
Overconfidence can provide psychological benefits, such as high
self-confidence. Strong self-confidence
can influence individual thinking and behavior in decision making.
Overconfidence is a feeling of self-confidence that is too
excessive. This behavior has a negative impact on investment decision making. An
irrational act that makes an investor overestimate the knowledge and abilities
possessed without thinking about the risks that will be obtained later. An investor who has overconfidence will
overestimate the knowledge he has which estimates that he will get a greater
profit in making an investment.
One aspect of behavioral bias that has received the most
attention from researchers in the financial sector is overconfidence (Ainia
& Luthfi, 2019). Overconfidence is an unreasonable belief based on impulse,
self-judgment, and exaggerated cognitive abilities. Overconfidence makes a
person feel smarter and has better information so that when the person predicts
an event that he thinks is certain, often the reality is less than expected
(Pompian, 2012).
Overconfidence is also considered to exaggerate one's
abilities, performance, and chances of success.
Overconfidence is a belief that judgment is better than others
(overplacement), as well as excessive certainty regarding the accuracy of one's
beliefs (overprecision) (Moore & Healy, 2008 in Ainia & Lutfhi, 2019).
Someone who is too confident will tend to override the information obtained
because they are too confident in their own beliefs, too confident, and believe
in their views and knowledge so that other information that is actually related
is important to ignore. The negative
impact of overconfidence is that it makes someone make decisions that are more
extreme than they should be (Pikulina, Renneboog, & Tobler, 2017). Especially with the trust investors believe
that they will get a high profit rate and low risk when investing, although
this cannot be guaranteed and may not necessarily happen. This hypothesis is
supported by Bakar & Yi (2016), Metawa, et al. (2018), and Ainia & Lutfi (2019) state
that there is an influence between Overconfidence on Investment Decisions.
H4: Overconfidence have effect on Investment Decision
Financial literacy which refers to the knowledge,
understanding, and skills of individuals or organizations in managing finances
can provide significant benefits for organizational performance as a whole. The
high level of financial literacy can help organizations make better financial
decisions. By having adequate knowledge of financial concepts, such as budget
management, investment, or financing, organizations can make smarter and
strategic decisions in managing their financial resources. Strong financial
literacy can improve an organization's ability to analyze and understand
financial reports. By understanding the financial information presented in
financial reports, organizations can evaluate their financial performance,
identify potential trends or problems, and take appropriate actions to improve
performance.
Financial literacy can assist organizations in planning and
managing financial risks. With a good
understanding of risk and risk management strategies, organizations can
identify, measure and mitigate the risks associated with their financial
decisions. This can reduce uncertainty and minimize the negative impact on
organizational performance. High financial literacy can help organizations
establish better relationships with stakeholders, such as banks, investors or
business partners. Organizations that are able to communicate clearly and
understand the financial language used in business transactions are likely to
gain trust, support, and access to better financial resources. Thus, it is
assumed that high Financial Literacy can have a positive influence on organizational
performance in aspects such as better financial decision-making, in-depth
analysis of financial statements, effective risk management, and better
relations with stakeholders.
Although financial literacy is considered important in
financial management, there are arguments stating that the low level of
financial literacy in an organization can hamper overall performance. The low
level of financial literacy can result in sub-optimal financial decision
making. Individuals or organizations that do not understand basic financial
concepts, such as budget management, investing, or financing, may face
difficulties in making wise and effective decisions about managing their
finances. The lack of understanding of financial reports can hinder
organizations' ability to analyze their financial performance. If organizations
are unable to understand the information presented in financial reports, they
may find it difficult to identify trends, potential problems, or opportunities
for improvement, which could negatively impact their performance.
The low level of Financial Literacy can also have an impact
on poor risk management. Organizations
that do not understand well the risks associated with financial decisions, such
as investment risk or financing risk, may take inappropriate risks or are
unable to manage existing risks effectively.
As a result, they may incur unnecessary or unexpected financial losses.
Low financial literacy in organizations can also affect
relationships with stakeholders, such as banks, investors or business partners.
Lack of understanding of the language of finance or financial concepts can
hinder effective communication and affect the trust and support earned from
these stakeholders. Thus, it can be assumed that a low level of Financial Literacy
in an organization can have negative influence on organizational performance in
aspects such as suboptimal financial decision making, limited financial
performance analysis, poor risk management, and hampered relationships with
stakeholders interest.
H5: Financial Literacy have effect on Organizational
Performance
Financial Behavior which refers to the habits and actions of
individuals or organizations related to financial management can make a
positive contribution to overall organizational performance. Disciplined and
responsible financial behavior can help organizations manage their finances
well. By adopting habits such as prudent
spending, prudent debt management, and effective budget monitoring,
organizations can maintain financial balance and avoid financial problems that
might hinder their performance.
Intelligent and purposeful Financial Behavior can assist in
making the right investment decisions.
Organizations that are able to perform in-depth financial analysis,
weigh risks and opportunities well, and have a sound resource allocation
strategy tend to achieve better returns on their investments. Professional and
ethical Financial Behavior can build trust with stakeholders. Organizations that adhere to the principles
of integrity in financial management, including implementing correct accounting
standards, avoiding fraud, and being committed to transparency, tend to have a
good reputation in the eyes of customers, business partners and investors.
Financial behavior which refers to the habits and actions of
individuals or organizations related to financial management can reduce overall
Organizational Performance. Undisciplined or irresponsible financial behavior
can cause financial problems in the organization. For example, habits such as overspending,
poor debt management, or non-compliance with financial procedures can result in
budget imbalances, poor liquidity, or other financial problems.
Inaccuracy in financial management can result in inaccurate
judgments and poor decisions regarding investment or resource allocation. If the organization does not carry out
adequate analysis or does not carefully consider the risks and potential
returns, this can lead to significant financial losses. Unprofessional or unethical
financial behavior can damage the reputation of the organization and affect
relations with outsiders. For example,
financial fraud, violation of laws or unethical actions in financial management
can undermine the trust of customers, business partners or investors, thereby
affecting the overall performance of the organization. Therefore, this assumes that undisciplined,
irresponsible, or unprofessional financial behavior can have a negative
influence on organizational performance in aspects such as financial stability,
wise decision-making, and organizational reputation.
H6: Financial Behavior have effect on Organizational
Performance
Risk perception, namely the perception or understanding of
individuals or organizations about the risks involved in business decisions can
play an important role in improving organizational performance. Having an
accurate perception of risk can help organizations make better decisions. By understanding and identifying potential
risks, organizations can develop more effective strategies to reduce the negative
impact of risks or take advantage of opportunities associated with risks.
High risk perception can motivate organizations to take more
proactive preventive actions.
Organizations that have a high awareness of risk tend to carry out risk
assessments continuously, implement strong internal controls, and adopt
policies and procedures designed to reduce the risks they face. High risk
perception can encourage organizations to be more adaptive and responsive to
changes in the business environment. Organizations that have a good
understanding of risk tend to be more alert to changes in internal and external
factors that may affect their performance.
Risk Perception, namely the perception or understanding of
individuals or organizations about the risks involved in business decisions can
have a detrimental effect on organizational performance. If an organization has too high or excessive
Risk Perception, this can lead to an overly conservative attitude and avoidance
of potentially profitable business opportunities. Organizations may be inclined to take
reasonable risks to achieve growth or innovation, which could hinder their
ability to compete and thrive in competitive markets.
Excessive risk perception can lead to inefficient deployment
of resources. Organizations that focus
too much on avoiding risk may divert too many resources to managing risk or
tightening internal controls, thereby forfeiting opportunities to allocate
those resources to more productive or strategic activities. High risk
perception can affect the quality of decision making. If organizations are overly aware of risk,
they may tend to be overly cautious and lack the courage to make important
decisions.
H7: Risk Perception have effect on Organizational
Performance
Overconfidence is a common characteristic that is often
found in humans that reflects a person's tendency to overestimate his ability,
the possibility of success and the probability that the person will obtain
positive outcomes as well as the accuracy of the knowledge possessed.
Overconfidence which refers to excessive belief or
unrealistic self-assessment can have a beneficial effect on organizational
performance in several aspects. Overconfidence can encourage ambition and
courage to take risks. Individuals who
feel confident and confident are more likely to take steps that are unusual or
involve a higher level of risk. This
courage can drive innovative initiatives, business expansion, or seize new
opportunities that can increase the growth and competitive advantage of the
organization.
Overconfidence can affect self-perception and team
confidence. Individuals who exhibit strong self-confidence can influence team
members and build a positive climate in which team members feel motivated and
confident to achieve common goals. This can
increase the productivity and effectiveness of the team in achieving the
desired results. Overconfidence can affect attitudes towards challenges and
resilience in the face of difficulties.
Overconfidence individuals tend to have high self-confidence in their
ability to overcome obstacles and face challenges with optimism.
Overconfidence which refers to excessive belief or
unrealistic self-assessment can be detrimental to organizational performance in
several ways. Overconfidence can lead to making decisions that are too bold or
risky. Individuals who are overly
confident tend to underestimate or ignore the risks associated with investment
decisions or business strategies. As a
result, the organization may experience financial losses or difficulties in
achieving the goals set.
Overconfidence can also hinder an organization's ability to
learn from mistakes or receive constructive feedback. Individuals with
Overconfidence often find it difficult to accept criticism or different
suggestions, which can hinder an organization's ability to adapt, innovate, and
improve their performance. Overconfidence can affect team relations and
cooperation in organizations.
Individuals who are overly confident may tend to belittle the
contributions or opinions of others, which can hinder effective communication
and reduce collaboration within a team.
This can have a negative impact on the overall team and organizational
performance. Therefore, this assumes
that Overconfidence can have a negative influence on Organizational Performance
including aspects such as profitability, operational efficiency, adaptability,
and team dynamics.
H8: Overconfidence have effect on Organizational Performance
Smart and precise investment decisions can play an important
role in improving organizational performance. Through wise investment
decisions, organizations can allocate their resources efficiently to strengthen
their core capabilities and competencies. For example, investment in new
technology or research and development can drive product or service innovation,
thereby increasing the competitiveness of organizations and their ability to
meet customer needs. In addition, the right investment in physical assets or
infrastructure can improve operational efficiency and organizational productivity.
However, investment decisions that are inappropriate or
unwise can hinder organizational performance. One of the factors that can cause
a negative influence is inaccuracy in investment evaluation and analysis. If
organizations make investment decisions without carefully considering the
risks, potential returns, or other relevant factors, this can result in
inefficient use of resources and reduced performance. In addition, investments
that are not in line with the organization's business strategy or long-term
goals can also have a negative impact.
H9: Investment Decision have effect on Organizational
Performance.
RESEARCH METHOD
This study was designed using hypotheses and is giving an
explanation of the object under study.
The population in this study are tenants in the Jakarta Industrial
Estate Pulogadung area with a total of 406 tenants. Respondents in this study
amounted to 100 with a sampling technique using non-probability sampling method
with purposive sampling method.
Meanwhile, the criteria used as samples are Finance Managers up to
Directors who represent tenants located in the Jakarta Industrial Estate
Pulogadung Area.
This research based on the source is primary data. The
primary data is in the form of a questionnaire which contains a list of
questions to get responses that have been filled out by the respondents.
Respondents will answer the questions used to obtain primary data by selecting
answers that have been provided with a Likert scale score of 1-5 where a score
of 1 is for strongly disagree and a score of 5 is for strongly agree.
Testing the research hypothesis was carried out using the
Structural Equation Model-Partial Least Square (SEM-PLS) approach using
SmartPLS 4 software. PLS is a structural equation model (SEM) based on
components or variance. According to Hair, et al. (2016), PLS is an alternative
approach that shifts from a covariance-based SEM approach to a variant-based
one. SEM which is based on covariance
generally tests causality/theory, while PLS is more of a predictive model.
RESULT
AND DISCUSSION
Table 1.
Path Significance Test
|
Variable |
Original Sample (O) |
Sample Mean (M) |
Standard Deviation (STDEV) |
t Statistics (O/STDEV) |
P Values |
|
|
-0.320 |
-0.314 |
0.157 |
2.047 |
0.041 |
|
|
0.247 |
0.244 |
0.100 |
2.471 |
0.014 |
|
|
0.337 |
0.348 |
0.102 |
3.301 |
0.001 |
|
|
0.669 |
0.654 |
0.116 |
5.779 |
0.000 |
|
|
0.120 |
0.134 |
0.154 |
0.776 |
0.438 |
|
|
-0.147 |
-0.152 |
0.153 |
0.956 |
0.339 |
|
|
0.849 |
0.823 |
0.165 |
5.152 |
0.000 |
|
|
0.184 |
0.202 |
0.133 |
1.380 |
0.168 |
|
|
-0.182 |
-0.183 |
0.141 |
1.292 |
0.196 |
Source:
Data Proceed (2023)
Effect of Financial Literacy on Investment Decision
The results of the study show that Financial Literacy have
negative effect on Investment Decisions.
Financial Literacy is basically a valuable asset in financial
management, but it is possible that there are situations where a high level of
Financial Literacy can negatively affect Investment Decisions. One reason Financial Literacy can have
negative effect on Investment Decisions is due to the tendency to take
excessive risks. When individuals or groups have a high level of understanding
about investing, they may be more likely to make complex or high-risk
investments. Without adequate understanding of the risks involved, such
individuals or groups may become trapped in investments that do not suit their
risk profile or without considering proper portfolio diversification. As a result, caught in a significant
financial loss.
A high level of Financial Literacy causes individuals or
groups to become overconfident in making Investment Decisions. The individual
or group feels that they have enough knowledge to overcome risks and produce
profitable investment returns. As a result,
there is a lack of inclination to seek advice from financial experts or conduct
thorough research before making an investment decision. This overconfidence can lead to neglect of
relevant risk factors or important information, thereby affecting the quality
of investment decisions.
In addition, a high level of financial literacy can also
cause individuals or groups to be vulnerable to decision bias and
misjudgment. Even if they have a good
understanding of financial concepts, they may still be affected by cognitive
biases such as Overconfidence, Aversion to Losses, or Herding Behavior. This can result in making investment
decisions that are irrational or not optimal, which in turn will have a
negative impact on investment returns. The results of this study fully support
previous research by Lusardi & Mitchell (2014) and Klapper & van
Oudheusden (2015) which state that Financial Literacy have negative effect on
Investment Decisions.
Effect of Financial Behavior
on Investment Decision
The results of the study show that Financial Behavior have
positive effect on Investment Decisions.
When individuals or groups within an organization show good financial
behavior, there is a tendency to make more rational investment decisions based
on a deep understanding of the risks and opportunities that exist. One of the reasons Financial Behavior can
have a positive effect on Investment Decisions is caused by behavior that is
aware of the Company's security.
Financial Behavior can have a positive effect on Investment
Decisions due to high awareness of risk management. Individuals or groups who
have good financial behavior tend to understand the importance of portfolio
diversification, recognize existing investment risks, and conduct a thorough
risk analysis before making a decision.
The individual or group will consider factors such as financial goals,
risk tolerance, and available time to invest.
With a good understanding of risk and the ability to manage it, they can
make wiser investment decisions and potentially better returns.
Positive Financial Behavior reflects discipline in managing
finances and preparing funds for investment.
Individuals or groups that have the habit of saving funds regularly,
manage debt wisely, and have a balanced budget will have sufficient resources
to invest. They tend to have better
financial readiness, so they can make investment decisions more confidently and
without rush. By having good financial
behavior, individuals or groups can build a strong foundation for successful
long-term investments.
Furthermore, positive Financial Behavior includes knowledge
and awareness about different investment instruments. Individuals or groups who are open-minded,
seek information, and participate in financial education have a better chance
to understand and choose investment instruments that suit their goals and risk
profile. They tend to seek advice from
financial experts, do their own research, and make investment decisions based
on solid insight. Thus, they can choose
investments that better suit their long-term goals and increase the chances of
achieving a profitable return. The results of this study fully support previous
research by Arianti (2018), Grohmann (2018), and Rustan (2021) which stated
that Financial Behavior have positive effect on Investment Decisions.
Effect of Risk Perception
on Investment Decision
The results of the study show that Risk Perception have
positive effect on Investment Decisions.
When individuals or groups have a favorable risk perception, there is a
tendency to make smarter investment decisions by considering the associated
risks and opportunities. Risk Perception
has a positive effect on Investment Decision due to the ability to better
identify risks. With an accurate risk
perception, individuals or groups can recognize the potential risks associated
with the investment under consideration.
Individuals or groups are able to understand the risks
involved which in this study are seen through the dimensions of Physical Risk,
Performance Risk, Physiological Risk, Financial Risk, Time Loss Risk, and
Social Risk. By knowing these risks,
individuals or groups can take appropriate actions to reduce risks or deal with
them with the right strategies.
Good Risk Perception allows individuals or groups to
evaluate risk objectively. Individuals
or groups can consider the probability of a risk occurring, its potential
impact, and the time required for recovery in a bad scenario. With a more accurate risk evaluation,
individuals or groups can gauge the potential gains and losses from the
investments under consideration. This
helps in making wiser investment decisions and in line with the Company's
long-term goals.
In addition, a balanced Risk Perception can prevent
individuals or groups from excessive risky behavior. When individuals or groups have good risk
perception, there is a tendency to be less affected by emotions, such as fear
or greed. Individuals or groups are able
to consider risks more rationally and not rush in making investment
decisions. By avoiding speculative or
impulsive behavior, you can minimize potential losses and optimize long-term
investment returns. The results of this study fully support previous research
by Sulistyowati, et al. (2022) stated
that Risk Perception have positive effect on Investment Decisions.
Effect of Overconfidence
on Investment Decision
The results of the study show that Overconfidence have
positive effect on Investment Decisions.
Overconfidence has a positive effect on Investment Decisions caused by
high self-confidence which encourages individuals or groups to take greater
risks. When a person or group feels very
confident in their judgments and predictions, they are more likely to make bold
investments and see hidden opportunities.
This high level of self-confidence can motivate them to take action and
take advantage of investment opportunities that others who are more hesitant
may overlook. In some cases, this bold
attitude can lead to significant returns on investments.
In addition, Overconfidence provides an advantage in
situations where careful research or analysis has been carried out before
making an Investment Decision. If
individuals or groups have made thorough preparations by collecting relevant
information and carrying out appropriate analysis, high self-confidence can
strengthen their confidence in the decisions that have been taken. In this case, Overconfidence serves as a
motivator to carry out investment plans with strong determination and high
discipline. This can increase the
chances of success in investing.
However, Overconfidence also has risks. When overconfidence
is not based on accurate information or rational analysis, it can lead to
erroneous judgments and poor decisions.
Overconfident individuals or groups may ignore real risks or fail to consider
important factors in making investment decisions. Therefore, it is important to strike a
balance between healthy self-confidence and objective evaluation in making
investment decisions. The results of this study fully support previous research
by Bakar & Yi (2016), Javed, et al.
(2017), Metawa, et al. (2018), and Ainia & Lutfi (2019) which state
that Overconfidence have positive effect on Investment Decisions.
Effect of Financial Literacy on Organization Performance
The results of the study show that financial literacy have
no effect on organizational performance. One of the reasons that financial
literacy does not have a direct effect on Organizational Performance is because
organizations have relied on professional financial experts to manage financial
and investment aspects. In this case,
even though individuals or groups within the organization may have a low level of
financial literacy, organizations can overcome this deficiency by relying on
financial professionals who have a deep understanding of financial and
investment aspects. Thus, individual or
group financial literacy is not the main determining factor in determining
organizational performance.
Organizational performance influenced by managerial factors
and a strong business strategy. Good
managerial skills, such as the ability to plan, organize, and control
effectively can have a greater impact on organizational performance than
individual or group levels of financial literacy. In addition, the success of
the organization is also determined by the right business strategy and good
implementation. If an organization has a
strong business strategy and is able to implement it properly, the level of
individual or group financial literacy may be a less significant factor in
determining organizational performance.
In addition, financial literacy can be improved through
proper education and training. If an organization realizes the importance of
financial literacy and makes efforts to improve individual or group financial
understanding within it, the impact of financial literacy on organizational
performance can be strengthened. Through financial training, teaching about
financial management, or consulting with financial experts, individuals or
groups within organizations can improve their ability to manage finances and
make smart investment decisions.
Effect of Financial Behavior
on Organization Performance
The results of the study show that Financial Behavior has no
effect on Organizational Performance.
One reason Financial Behavior have no effect on organizational
performance is when the organization has implemented a good internal control
system. With strict procedures and
policies related to financial management, organizations can minimize the risk
of adverse financial behavior. For example, by adopting effective monitoring
and reporting mechanisms, organizations can identify and address inappropriate
or harmful actions in a timely manner.
Organizational performance influenced by macroeconomic
factors and changes in market conditions that are not directly related to the
financial behavior of individuals or groups. For example, economic
fluctuations, changes in government policies, or intense market competition can
have a greater influence on organizational performance than the financial
behavior of individuals or groups. In this context, these external factors are
the main determining factors in determining organizational performance.
In addition, the influence of financial behavior on
organizational performance can be suppressed if the organization has a strong
and focused business strategy. If the
organization has a clear strategic direction, well-defined goals, and a mature
implementation plan, then organizational performance is more likely to be
influenced by successful strategy implementation than individual or group
financial behavior. In this case,
organizational success depends more on fulfilling an effective business
strategy than on behavioral financial factors.
Effect of Risk Perception
on Organization Performance
The results showed that Risk Perception have positive effect
on Organizational Performance. When
individuals or groups within an organization have a good understanding of the
risks they face and are able to evaluate risks effectively, this can help the
organization make better decisions, manage risks more efficiently, and achieve
better overall performance.
By having an accurate risk perception, individuals or groups
within the organization can better identify risks. Individuals or groups are able to identify various
risk factors that may affect organizational performance, both internally and
externally. By having a deep
understanding of existing risks, organizations can take appropriate steps to
manage, reduce or even avoid these risks.
This capability assists the organization in facing challenges and
minimizing the negative impacts that may occur.
Furthermore, accurate risk perception enables individuals or
groups within the organization to carry out risk evaluations more
effectively. Individuals or groups can
consider the possibility of a risk occurring, the potential impact, and the
probability of the risk occurring. By
conducting a good risk evaluation, organizations can allocate resources more
efficiently, identify areas that require risk protection or mitigation, and
take appropriate preventive measures. It
assists organizations in optimizing resource usage, reducing losses and
improving overall performance.
In addition, accurate risk perception also encourages
individuals or groups within the organization to adopt a proactive attitude
towards risk. Individuals or groups will
be more aware of changing conditions, market trends, or environmental changes
that may affect organizational performance. By having a good risk perception,
organizations can be more responsive to change, better prepared to face
challenges, and more innovative in exploring new opportunities. This allows organizations to take advantage
of controlled risks and produce better results.
Effect of Overconfidence
on Organization Performance
The results showed that overconfidence have no effect on organizational
performance. This can occur when the
tendency of overconfidence does not affect the organization's overall strategic
decision making or there are other factors that are able to compensate for this
tendency. One reason overconfidence does not affect organizational performance
is the existence of a structured and systematic decision-making process.
If an organization has a good decision-making process,
including accurate data collection, objective analysis, and careful risk
evaluation, individual or group overconfidence tends not to dominate
decision-making. In this context, the
decisions taken are based more on facts and available evidence than on
excessive beliefs.
Overconfidence have no effect if the organization adopts a
culture that encourages open and critical discussion. In organizations that value critical thinking
and provide space for different perspectives, individual or group overconfidence
can be overcome through a process of various discussions and assessments. By testing and filtering ideas and making
decisions based on collective thinking, overconfidence will not dominate and
have a negative impact on organizational performance.
Furthermore, the influence of organizational leaders also
extends to the impact of overconfidence on organizational performance. When a
leader possesses the ability to acknowledge and address overconfidence
tendencies within themselves and their team, appropriate measures can be
implemented to mitigate potential risks. Astute leaders will promote objective
self-assessments among their teams, foster critical thinking, and advocate for
evidence-based and comprehensive decision-making processes.
Effect of Investment Decision
on Organization Performance
The results of the study show that Investment Decision have
no effect on Organizational Performance.
In some cases there are factors that can cause Investment Decisions to
have no direct effect on Organizational Performance. These factors include market
uncertainties, changes in economic conditions, changes in government
regulations, or even failures in implementing investment strategies.
When an Investment Decision have no effect on Organizational
Performance, this can occur if the decision does not thoroughly consider the
factors that may affect Organizational Performance. For example, if the market analysis used in
decision making is inaccurate or does not take into account the latest
developments, the results may not be as expected. In addition, investment decisions that do not
affect organizational performance can also occur if management does not
properly implement the investment strategy that has been set. The inability to carry out an appropriate and
effective investment plan can hinder the achievement of organizational goals
resulting in minimal impact on overall performance.
Apart from internal factors, external factors can also
contribute to the unaffected Investment Decision on Organizational
Performance. Unforeseen changes in
economic conditions, such as a financial crisis or shifts in market trends can
make investment decisions that were previously thought to be appropriate become
ineffective. In addition, significant
changes in government regulations can also make investment decisions have no
effect on organizational performance because organizations must adjust their
investment strategies to these changes.
CONCLUSION
Based on the analysis and research findings, it can be
concluded that Financial Literacy have negative effect on Investment Decisions due
to a high level of Financial Literacy causes individuals or groups to become
overconfident in making Investment Decisions. Financial Behavior have positive
effect on Investment Decisions due to behavior that is aware of the Company's
security. Risk Perception have positive effect on Investment Decisions due to
the ability to better identify risks. Individuals or groups are able to
understand the risks involved which in this study are seen through the
dimensions of Physical Risk, Performance Risk, Physiological Risk, Financial
Risk, Time Loss Risk, and Social Risk. Overconfidence have positive effect on
Investment Decisions due to high self-confidence encourages individuals or
groups to take greater risks.
Financial Literacy have no effect on Organizational
Performance. This is due to the Organization having relied on professional
financial experts to manage financial and investment aspects. Financial
Behavior has no effect on Organizational Performance due to the Organization
has implemented a good internal control system so that Financial Behavior does
not have a significant influence on Organizational Performance. Risk Perception
have positive effect on Organizational Performance due to individuals or groups
within the organization being able to better identify risks which makes it
possible to carry out risk evaluations more effectively and adopt a proactive
attitude towards risk. Overconfidence have no effect on Organizational
Performance due to the conditions in which the Organization already has a good
decision-making process, including accurate data collection, objective
analysis, and careful risk evaluation, so individual or group Overconfidence
tends not to be dominant in decision making. Investment Decisions have no
effect on Organizational Performance due to conditions where the investment
decision does not thoroughly consider the factors that may affect
Organizational Performance.
This study tried to develop a questionnaire designed to
determine the factors that influence Investment Decisions and its implications
on Organizational Performance, further research can use the questionnaire
contained in this study or develop it according to the needs required. This
study succeeded in finding that there is a positive relationship between Risk
Perception on Organizational Performance, further research can use Perceived
Risk as a factor influencing Organizational Performance and add other factors
not examined in this study. This study examines the effect of Investment
Decisions on Organizational Performance, but does not rule out the possibility
for further research to examine Organizational Performance on Investment
Decisions.
REFERENCES
