Behavioral and cognitive analysis of risky financial behavior: Case of loan issuance

Abstract

According to the traditional economic approach, individual decisions are made in a way that reflects their own interests and is rational. Behavioral economics is a branch of economics that integrates economics and psychology in the analysis of human behavior. Indeed, opting for a risky financial choice is not always easy. For this, we seek to know the degree of difficulty related to the level of actions and behaviors of individuals faced with a risky financial choice. We developed an experimental framework in which the subject had to choose between two risky choices during a debt transaction. In addition, we conducted a two-level questionnaire (control and experimental situation) via the computer-assisted diffusion method. Computer-Assisted Web Interviewing (CAWI) with 114 anonymous Moroccan individuals, in which they had to answer risk-free questions (control situation) followed by risky shows (experimental financial situation). The study revealed that the time given by subjects to risk-free questions (M = 3.09 min) was less than that given to risky questions (M = 10.29 min). Similarly, gender impacts the duration of response to risky questions (p < 0.05), women expressed greater risk aversion than men, in addition, the age variable has no impact. In addition, the age variable has no impact on the duration associated with the response to risky questions. Finally, we found that the notion of risk becomes more intense at the cognitive and neural level when it is associated with the financial context.

Paper Type: Empirical Research

JEL Classification:  C90, D14, D81, D87.