Cognitive Biases and Financial Decision Making: The Role of Digital Finance and Financial Literacy

Authors

  • Kinza Arif Institute of Business Management Sciences, University of Agriculture Faisalabad, Pakistan.
  • Muhammad Hafeez Institute of Business Management Sciences, University of Agriculture Faisalabad, Pakistan.
  • Muhammad Tayab Tahir Institute of Business Management Sciences, University of Agriculture Faisalabad, Pakistan.
  • Sajida Parveen Office of Research, Innovation and Commercialization (ORIC), University of Agriculture Faisalabad, Pakistan.

DOI:

https://doi.org/10.52223/JSSA25-060104-121

Keywords:

Cognitive Biases, Financial Decision-Making, Digital Finance, Financial Literacy, PSL-SEM

Abstract

Cognitive biases and their influence on investment choices are a key field of research, especially in the context of financial literacy and digital finance. Cognitive biases, which include factors such as emotions, social pressure, and heuristics, lead to deviations from norms or rationality in judgment. This research study aimed to explore the connection between financial literacy, digital finance, cognitive biases, and financial decision-making. Data were collected through structured survey questionnaires from potential investors and banking sector users within Pakistan using a convenience sampling approach—a sample size of 365 potential investors filled out the questionnaire. Suitable econometric techniques, including PSL-SEM and SPSS, were applied to estimate empirical outcomes concerning the impact of cognitive biases, financial literacy, and digital finance on financial decision-making. The findings demonstrate cognitive biases such as heuristics, overconfidence, herding, heuristics, confirmation, and anchoring have a major effect on financial decision-making. This study also uncovered that financial literacy has a strong mediation effect on financial decision-making. This study also revealed digital finance has a moderation effect on financial decision-making. This research aimed to inform investors, financial organizations, and individuals to make more informed choices.

Downloads

Download data is not yet available.

Downloads

Published

2025-01-18

How to Cite

Arif, K., Hafeez, M., Tahir, M. T., & Parveen, S. (2025). Cognitive Biases and Financial Decision Making: The Role of Digital Finance and Financial Literacy. Journal of Social Sciences Advancement, 6(1), 27–42. https://doi.org/10.52223/JSSA25-060104-121
Bookmark and Share