An Integrated Model of Financial Literacy among B–School Graduates Using Fuzzy AHP and Factor Analysis

Abstract

Financial literacy is a very relevant concept in today’s world, where the financial markets are growing each day. Therefore, the objective of this study is to identify the critical dimensions of financial literacy in the Indian context. In this cross–sectional research, the data are collected from 698 students who were studying in leading private and government B–schools in the Chandigarh Tri–City region. The exploratory factor analysis is used to extract the factors that affect the financial literacy of B–school graduates. The confirmatory factor analysis is used to validate these factors. Finally, fuzzy AHP is used to rank these factors. The results of this study identify the five critical financial literacy factors using exploratory factor analysis and confirmatory factor analysis. In addition to this, fuzzy AHP is used to rank the identified factors. Results show that the most important factor of financial literacy is financial or professional training followed by financial behavior, financial attitude, financial knowledge, and the least important factor is financial culture. Financial literacy is essential from the youth’s point of view. To our knowledge, no such study has been done that has tried to model financial literacy in the Indian context through exploratory factor analysis, confirmatory factor analysis, and fuzzy AHP.

TOPICS: Behavioral financial theory, behavioral financial in wealth management, long term/retirement investing

Key Findings

• ▪ Financial literacy improves the financial decisions of an individual. The measurability of the construct improves when the construct is analyzed across different dimensions.

• ▪ The study makes use of exploratory factor analysis, confirmatory factor analysis, and fuzzy AHP to identify, validate, and prioritize critical dimensions of financial literacy.

• ▪ Financial training is the most important factor of financial literacy, followed by financial behavior, financial attitude, and financial culture.