The Interaction Of Emotional Intelligence And Financial Literacy On Investment Decisions: A Mediation Study Of Risk Tolerance And Risk Perception

Siti Aisjah; Atim Djazuli; Nuraini Desty Nurmasari

Authors

Siti Aisjah University of Brawijaya
Atim Djazuli University of Brawijaya
Nuraini Desty Nurmasari University of Brawijaya

Keywords:

Financial Literacy, Emotional Intelligence, Risk Perception, Risk Tolerance, Investment Decision.

Abstract

Investment in financial assets has become a topic of frequent discussion among the younger generation in recent years. This trend aligns with the growth of investors, as reflected in the Single Investor Identification (SID) data. The aim of this study is to examine the impact of financial literacy and emotional intelligence on investment decisions, both directly and indirectly. Additionally, the research seeks to explore the role of risk perception and risk tolerance as mediators in the relationship between financial literacy, emotional intelligence, and investment decisions. This study adopts a quantitative approach and focuses on Generation Z in East Java, with a population of 11,933,122 individuals. The sampling technique employed is purposive sampling, with inclusion criteria such as: individuals residing in East Java, individuals aged between 18 and 24 years, individuals with an SID as an investor identification, and individuals who have previously invested in capital market financial products. The sample size consists of 500 respondents, calculated using Slovin's formula. Data collection was carried out through an online questionnaire distribution. The data analysis method used in this study is Structural Equation Modeling (SEM) with Partial Least Squares (PLS). The result of this study showed that financial literacy significantly influences investment decisions, risk perception, and risk tolerance, with risk perception having a significant impact on investment decisions. However, risk perception and risk tolerance do not mediate the relationship between financial literacy and investment decisions, while emotional intelligence positively and significantly affects investment decisions, risk tolerance, and risk perception, with risk tolerance mediating the relationship between emotional intelligence and investment decisions and risk perception mediating the relationship between emotional intelligence and investment decisions. This research suggested that financial education programs focus not only on improving financial literacy but also on developing emotional intelligence, especially for younger investors in Generation Z. Furthermore, policymakers and financial institutions should consider incorporating emotional intelligence training and risk management strategies into their investor education initiatives. The implications of this research extend to the importance of understanding the psychological aspects of investment behavior, which could enhance decision-making and promote more sustainable investment practices among young investors.

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