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Professional Financial Advice, Self-Control and Saving Behavior

Liu, Fen
http://rave.ohiolink.edu/etdc/view?acc_num=osu1397775657

Abstract Details

2014, Doctor of Philosophy, Ohio State University, Human Ecology: Family Resource Management.
The purpose of this study is to examine the effects of professional financial advice (PFA) and self-control ability on saving behaviors, as well as the interaction of PFA and self-control on saving behaviors. Professional financial advisors can use their financial expertise to help households make financial decisions, especially for those who lack financial literacy. Professional financial advisors may help households achieve better self-control in implementing financial plans, such as recommending commitment devices. The contribution of this study is to investigate saving behaviors by considering professional financial advice and self-control together. I extend the dual-self model of impulse control and derive three hypotheses from the theoretical model. The first hypothesis is that people with higher levels of self-control save more than those with lower levels of self-control. The second hypothesis is that professional financial advice has a positive effect on saving behaviors. The third hypothesis is that people with lower levels of self-control benefit more from getting PFA than those with higher levels of self-control. This study uses a German household panel dataset SAVE, which is collected annually from 2005 to 2009. Respondents are asked whether they discuss financial matters with financial advisors in banks, insurance companies or financial service providers. Using a number of behavioral proxies of self-control, I create an aggregate measure of self-control using the method of factor analysis via maximum likelihood estimation. I estimate a fixed-effects model to identify the effects of PFA and self-control on saving behavior. Empirical results find a significant positive relationship between PFA and short-run saving behaviors, such as savings out of windfall, annual total savings, and own pension contribution. There is a significant positive relationship between PFA and long-run financial outcomes, such as emergency funds, financial assets, illiquid assets and total assets. These empirical results provide evidence to support the hypothesis about the positive relationship between PFA and saving behaviors. I also find that the self-control ability has a significant positive relationship with annual total savings, emergency funds, financial assets and total assets. These empirical results support the hypothesis about the positive relationship between self-control ability and saving behaviors. The interaction term of PFA and self-control has a significant negative relationship with financial assets and total loans. These findings support the hypothesis that people with lower levels of self-control can benefit more by getting professional financial advice than those with higher levels of self-control.
Tansel Yilmazer (Advisor)
Caezilia Loibl (Committee Member)
Montalto Catherine (Committee Member)
Scharff Robert (Committee Member)
Dunn Lucia (Committee Member)
Behavioral Sciences; Economics

Recommended Citations

Citations

  • Liu, F. (2014). Professional Financial Advice, Self-Control and Saving Behavior [Doctoral dissertation, Ohio State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=osu1397775657

    APA Style (7th edition)

  • Liu, Fen. Professional Financial Advice, Self-Control and Saving Behavior. 2014. Ohio State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=osu1397775657.

    MLA Style (8th edition)

  • Liu, Fen. "Professional Financial Advice, Self-Control and Saving Behavior." Doctoral dissertation, Ohio State University, 2014. http://rave.ohiolink.edu/etdc/view?acc_num=osu1397775657

    Chicago Manual of Style (17th edition)

osu1397775657
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This open access ETD is published by The Ohio State University and OhioLINK.