engleski

Testing the effects of financial literacy on debt behavior of Croatian financial consumers using multivariate analysis methods

The problems related to financial illiteracy are increasingly becoming a topical issue. More than ever before, individuals are in charge of their own financial security, especially after retirement. The shift from defined benefit to defined contribution pension plans that has occurred over the past twenty years made individuals in charge of making their own financial decisions. Making necessary financial decisions are even more difficult due to increased complexity of financial products and services, financial instruments and financial institutions. Moreover, the later economic crisis highlighted the importance of understanding financial products and services and the risks of engaging in financial activities without the necessary level of financial knowledge and skills. There is mounting evidence that people are in terms of financial literacy undereducated and thus unfamiliar with even the most basic financial concepts. Consequently, in the developed countries there is a growing body of literature investigating the concept of financial literacy, its determinants as well as its possible effects on households’ wellbeing. However, the literature measuring financial literacy in small transition economies like Croatia is rather limited. Financial literacy reflects individuals’ ability to understand financial concepts, financial products and services and enables them to control their personal financial resources. Financial literacy should increase individuals’ ability to independently manage and plan their personal finances. The aim of this paper is threefold. Firstly, the aim is to detect and categorize the levels of financial literacy of Croatian financial consumers and to analyze whether the levels of financial literacy will be statistically significantly different with respect to socio-demographic characteristics. Second objective is to determine the factors underlying the debt behavior of financial consumers ; and the third objective is to investigate whether the debt behavior of the respondents will differ with respect to financial literacy levels. In order to analyze the effects of financial literacy on debt behavior of Croatian financial consumers, a financial literacy questionnaire was administered to a sample of 101 respondents living in Croatia. The sampling method used is snowball sample. After conducting the survey, multivariate statistical methods are used. To categorize the level of financial literacy of the respondents in the survey, multivariate cluster analysis is used. With the purpose of determining whether respondents’ financial literacy levels differ with respect to demographic characteristics, nonparametric chi-square test is applied. We investigated the effects of financial literacy on the debt behavior by principal component factor analysis. We also examined whether the debt behavior of the respondents differs with respect to financial literacy levels and socio-demographic variables using rank-based nonparametric test Kruskal–Wallis H-test. To examine the source of the difference in the debt behavior with respect to different financial literacy levels of the respondents we conducted a post hoc analysis using Dunnett’s test. Post-hoc analysis examines the combination of groups and reveals which group (s) is responsible for the difference. Dunnett's test is one of a number of post hoc tests run after a significant one-way analysis of variance (ANOVA), used to determine which differences are significant. It differs from other post hoc tests in that its use is restricted to comparing a number of experimental groups against a single control group.

Cluster analysis ; Factor analysis ; Financial literacy ; Financial illiteracy ; Debt behaviour ; Post hoc analysis

Ovaj rad je u potpunosti podržan od strane Hrvatske zaklade za znanost kao dio znanstvenog projekta „Statistical Modelling for Response to Crisis and Economic Growth in Western Balkan Countries“ (STRENGTHS) ; Broj projekta: HRZZ-IP-2013-11-9402. Voditeljica: prof. dr. sc. Ksenija Dumičić