Personal finance is more personal than it is finance: a study on factors influencing investment choice on investments in Tiruchirappalli city corporation, Tamil Nadu

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This study aims at to know the objectives of investments and also aims at to know the factors that are considered before investments, i.e., factors influencing in selection of a particular type of financial instruments and the behaviour of investors.

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Nội dung Text: Personal finance is more personal than it is finance: a study on factors influencing investment choice on investments in Tiruchirappalli city corporation, Tamil Nadu

International Journal of Management (IJM) Volume 7, Issue 7, November–December 2016, pp.265–270, Article ID: IJM_07_07_028 Available online at http://www.iaeme.com/ijm/issues.asp?JType=IJM&VType=7&IType=7 Journal Impact Factor (2016): 8.1920 (Calculated by GISI) www.jifactor.com ISSN Print: 0976-6502 and ISSN Online: 0976-6510 © IAEME Publication PERSONAL FINANCE IS MORE PERSONAL THAN IT IS FINANCE: A STUDY ON FACTORS INFLUENCING INVESTMENT CHOICE ON INVESTMENTS IN TIRUCHIRAPPALLI CITY CORPORATION, TAMIL NADU Dr. I. Francis Gnanasekar Associate Professor in Commerce, Former Vice-Principal & HOD St. Joseph’s College (Autonomous), Tiruchirappalli, India ABSTRACT This study aims at to know the objectives of investments and also aims at to know the factors that are considered before investments, i.e., factors influencing in selection of a particular type of financial instruments and the behaviour of investors. The data has been collected through structured questionnaire from the loyal, regular, serious, sincere investors. The data has been tested by different statistical analysis namely; Frequency table, Percentage analysis, Chi-square test, Descriptive statistics, Friedman rank test and so on. The findings of the study exposes that regular income is the main objective of investments and investor considering safety as a principal before investing. The Friedman rank test showed that not much difference between the top four factors like capital appreciation, to gain a regular return, investment return, and reducing future risk with regard to factors influence while selecting particular financial instruments. Key words: Safety of principal, Descriptive statics and Friedman rank test Cite this Article: Dr. I. Francis Gnanasekar, Personal Finance is more Personal than it is Finance: A Study on Factors Influencing Investment Choice on Investments in Tiruchirappalli City Corporation, Tamil Nadu. International Journal of Management, 7(7), 2016, pp. 265–270. http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=7&IType=7 1. INTRODUCTION Investment may be defined as an activity that commits funds in any financial/physical form in the present with an expectation of receiving an additional return in the future. The expectation brings with it a probability that the quantum of return may vary from a minimum to maximum. This possibility of variation in the actual return is known as investment risk. Thus every investment involves a return and risk. Investment is an activity that is undertaken by those who our savings. Savings can be defined as the excess of income over expenditure. However, all savers need not be investors B S Bodla and Karam Pal (2016). The basic objective of the investors minimizes the risk as well as maximizing the returns from the investment. In the modern world investments are abundantly available viz., equity shares, preference shares, debenture/bonds, mutual funds, real estate, postal savings, gold and so on. Similarly, several factors http://www.iaeme.com/IJM/index.asp 265 editor@iaeme.com
Dr. I. Francis Gnanasekar influencing the investors while selecting the particular type of financial interments viz., safety, liquidity, capital appreciation, personal factors, family influence and so on. Hence, the study was carried out to know the factors influencing the investors while selecting the financial instruments and behaviour of the investors. 2. OBJECTIVES OF THE STUDY • to know the objectives of investments and find out the factors that investors consider before investing; • to identify important factors influencing in selection of a particular type of financial instruments; and • to study the responses and behaviour of the investors when company announce annual results. 3. HYPOTHESES • There is no significant difference between age of the investor and their investment behaviour (Buy a Stock) • There is no significant difference between age of the investor and their investment behaviour (Hold a Stock) • There is no significant difference between age of the investor and their investment behaviour (Sella Stock) 4. REVIEW OF LITERATURE Dhiraj Jains and Nakul Dashora (2012) analyzed the rationality of the investors of Udaipur during different market expectations, dividend and bonus announcements, the impact of age, income levels and other market-related information on investment decisions of investors from Udaipur. The study exposed that, investors prefer ‘A wait and watch policy’ for taking their decisions, and are very cautious and their decisions are influenced by various psychological factors and behavioral dimensions. Syed Tabassum Sultana and S Pardhasaradhi (2012), examined the factors influencing Indian individual equity investors. The empirical findings of factor analysis exposed that all the 40 attributes are reduced to the following ten factors Individual Eccentric, Wealth Maximization, Risk Minimization, Brand Perception, Social Responsibility, Financial Expectation, Accounting information, Government & Media, Economic Expectation and Advocate recommendation factors. Francis Gnanasekar and Arul (2014), has stated that investors are of different categories. In this study, the researchers found out various types of investors like a conservative, moderately conservative, Aggressive and moderately aggressive. Moreover, investor’s risk tolerance varies on the basis of age, sex, income; financial goals and so on. Khoa Cuong Phan and Jian Zhou (2014), examined that factors influencing individuals’ investment behavioral intention in the Vietnamese stock market. The empirical findings of the study exposed that existence of psychological factors which supports the hypothesis that four psychological factors (overconfidence, excessive optimism, a psychology of risk and herd behavior) do have a significant impact on the individuals' attitude towards investment. Concurrently, the study has also brought out that gender has a strong moderation affect in the relations between the psychological factors and the attitude towards investments, between the attitude and behavioral intention, between subjective norms and behavioral intention as well as between perceived behavioral control and behavioral intention of Vietnamese individual investors. Francis Gnanasekar and Arul (2015), Portfolio investment covers a range of securities, such as stocks and bonds, as well as other types of investment vehicles. A diversified portfolio helps spread the risk of possible loss due to the below-expectations performance of one or a few of them. They are categorized in two major parts foreign institutional investment and investments by non-residents. http://www.iaeme.com/IJM/index.asp 266 editor@iaeme.com
Personal Finance is more Personal than it is Finance: A Study on Factors Influencing Investment Choice on Investments in Tiruchirappalli City Corporation, Tamil Nadu 5. METHODOLOGY 5.1. DATA The researcher attempts to collect the information regarding investment detail and investment pattern of the investors. For this purpose, the researcher identifies a number of stock broking agencies through survey and internet. By referring to the addresses of the stock broking agencies, it is found that most of them mainly in Thillainagar, Railway Junction area, Chattram Bus Stand, Palakarai, Woraiyur and Thennur. From these areas, there are 23 stock broking agencies exist. Among 23 stock broking agencies, six agents are not permited to collect the data from their clients; three stock broking agencies are closed due to some reasons. Rests of the 14 stock broking agencies are allowed to collect data. The researcher contacted the branch managers of 14 branches through phone and got the appointment for discussion. The researcher had several rounds of talks, discussion with the branch managers. The researcher collected the names and address of the regular customers of the stock broking agencies. The branch managers of the stock broking agencies selected 50 loyal, regular, serious, sincerely investors. The stock broking branch managers felt that only the above selected 50 respondents have been selected from each broking agencies. From the 14 agencies, 50 respondents were selected. Thus, 700 questionnaires were distributed and collected back. Then, the researcher conducted data validity test viz., Chrona Alpha Test. The test reveals 0.809. i.e., 80.9 per cent as its result. 5.2. Tools and Techniques Used for this Study The researcher collected primary data through a questionnaire from the loyal investors in Tiruchirappalli city area and used Statistical Packages for Social Sciences (SPSS) with appropriate coding for the drawing inferences. Tools are used in this study namely; Frequency table, Percentage analysis, Cross table, Friedman rank test and Chi-Square test are applied to analyze the data. 6. DATA ANALYSIS AND INTERPRETATION Table 1 Objectives of Investment Objectives No. of the Respondents Per cent High Returns 176 25.1 Tax benefits 94 13.4 Regular Income 313 44.7 Capital appreciation 117 16.7 Total 700 100.0 Source: primary data It is clear that from the table 1, among the 700 respondents, 176 respondents say High returns are their main investment objective, 94 respondents say Tax benefits are their investment objective, 313 respondents say Regular income is their investment objective and 117 respondents say Capital appreciation is their investment objective. Table 2 Factor to be considered before Investments Factor No. of the Respondents Percent Safety principal 234 33.4 Low risk 216 30.9 High returns 226 32.3 Maturity period 24 3.4 Total 700 100.0 Source: primary data http://www.iaeme.com/IJM/index.asp 267 editor@iaeme.com
Dr. I. Francis Gnanasekar It is clear that from the table 2, among the 700 respondents, 234 respondents consider the ‘safety principal’ is the factor to be considered before their investment plan, 216 respondents felt that ‘Low risk’ is the factor to be considered before their investment plan, 226 respondents considered ‘High returns’ is the factor to be considered before their investment plan and 24 respondents planned Maturity period is the factor to be considered before their investment plan. Table 3 Descriptive Statistics No of Std. Factors Mean Minimum Maximum respondents Deviation Tax benefits 700 4.77 2.889 1 9 To gain Regular returns 700 3.90 2.296 1 9 Reducing Future Risk 700 4.53 2.305 1 9 Capital appreciation 700 3.48 2.183 1 9 Reputations of the firm 700 5.68 2.164 1 9 Investment return 700 4.03 2.306 1 9 Time horizon 700 6.17 2.188 1 9 Investment goals 700 5.51 2.559 1 9 Risk tolerance 700 6.92 2.126 1 9 Source: primary data Table 3 (A) Friedman Rank Test Factors Mean value Rank Tax benefits 4.77 5 To gain Regular returns 3.90 2 Reducing Future Risk 4.53 4 Capital appreciation 3.48 1 Reputations of the firm 5.68 7 Investment return 4.03 3 Time horizon 6.17 8 Investment goals 5.51 6 Risk tolerance 6.92 9 Source: primary data In order to study the important factors influencing in selection of a particular type of financial instrument by the investors, an attempt have been made to compute their mean influencing factors. The mean influencing factors reflect the overall influenced factors for the investors while selecting financial instruments. The lower mean value represents higher influenced factors and vice-versa. The table 3 shows that among the nine importance factors capital appreciation is ahead of others in factors influencing. It is closely followed by to gain a regular return. The investment return is the third important factors influencing the investors. The important factors influence depends upon the type of financial instruments. In order to verify the above-mentioned fact, Friedman Rank test is used. The result of the test furnished in the Table 3 (A). It is understood that capital appreciation stands first rank and it is the most important factors influencing the investors. The second influencing factor is to gain regular returns and it is closely followed by investment return. The least influencing factor is a risk tolerance. From the above analysis it is clear that the basic factors influencing the investors, is the capital appreciation from their financial instruments, followed by gain as a regular return. http://www.iaeme.com/IJM/index.asp 268 editor@iaeme.com
Personal Finance is more Personal than it is Finance: A Study on Factors Influencing Investment Choice on Investments in Tiruchirappalli City Corporation, Tamil Nadu Table 4 Cross Table of Relationship between Age of the Investors and their Investment Behavior Buy a Stock Age Above expectation As per expectation Below expectation Total Up to 30 180 69 31 280 31- 40 119 55 13 187 41-50 79 17 18 114 51 and above 63 34 22 119 Total 441 175 84 700 Hold a Stock Age Above expectation As per expectation Below expectation Total Up to 30 50 217 13 280 31- 40 39 131 17 187 41-50 4 96 14 114 51 and above 34 73 12 119 Total 127 517 56 700 Sell a Stock Age Above expectation As per expectation Below expectation Total Up to 30 65 66 149 280 31- 40 50 30 107 187 41-50 22 10 82 114 51 and above 57 12 50 119 Total 194 118 388 700 Source: primary data Table 4 (A) Chi-Square Test Value d.f Asymp. Sig. (2-sided) Buy the Hold the Sell the Buy the Hold the Sell the stock stock stock stock stock stock Pearson Chi-Square 19.142a 33.888a 47.557a 6 .004 .000 .000 Likelihood Ratio 19.915 39.903 45.408 6 .003 .000 .000 Linear-by-Linear 4.312 .489 5.152 1 .038 .484 .023 Association N of Valid Cases 700 700 700 Source: primary data The table 4 exhibits the correlation between age of the investors and their investment behaviour. The behaviour of the investors namely ‘Buy a Stock’, ‘Hold a Stock’ and ‘Sell a Stock’ when the companies announce the annual results. The ‘F’ test carried out to know the association between age of the investors and their behaviour.From the table 4 observed that F Pearson chi-square has the probability of 0.004 which is lower than 0.05 (0.00
Dr. I. Francis Gnanasekar that there is a strong relationship between age of the investor and their investment behaviour (Sell the Stock). 7. FINDINGS OF THE STUDY • It is found out that majority of the respondents (44.7 per cent) are planning a regular income, is the main investment objective. • It is found that the majority of the respondents (33.4 per cent) consider the safety principal as their investment objective. • When Friedman Rank Test for factor influencing for selecting financial instruments was applied, it was found that not much difference between the top four factors like capital appreciation, to gain regular return, investment return, and reducing future risk with regard to factors influence. • When chi-square test for age and investment behaviour (Buy the Stock) was applied, it was found that there is a strong relationship between age of the investor and their investment behaviour (Buy the Stock). • When chi-square test for age and investment behaviour (Hold the Stock) was applied, it was found that there is a strong relationship between age of the investor and their investment behaviour (Hold the Stock). • When chi-square test for age and investment behaviour (sell the Stock) was applied, it is found that there is a strong relationship between age of the investor and their investment behaviour (sell the Stock). 8. CONCLUSION The study envisages the behaviour of the investors and factors influencing while selecting the particular type of financial instruments. The findings of the study exposed that regular income is the main objective investment and investor considering the safety principal for before investing. The Friedman rank test showed that not much difference between the top four factors like capital appreciation, to gain a regular return, investment return, and reducing future risk with regard to factors influence while selecting particular financial instruments. So, personal finance is more personal that it is finance. REFERENCE [1] B S Bodla and Karam Pal (2016), Introduction to Security Analysis, http://www.ddegjust. ac.in/studymaterial/mba/fm-304 pdf, accessed on 13th October, 2016. [2] Dr. R. Khader Mohideen and S. Amirthavalli. Impact of Micro Finance through Self Help Groups in Pudukottai District. International Journal of Management (IJM), 7 (2), 2016, pp. 134 - 141. [3] Journal of Arts, Science & Commerce, 3 (2) 78-88. [4] European Journal of Business and Management, 4 (18) 50-61. [5] Protagonist International Journal of Management and Technology, 1 (1) 1-15. [6] American Journal of Business and Management, 3 (2) 77-94. [7] Parishwang Piyush, Himanshu Negi and Navneet Singh, Study of Housing Finance in India with reference to HDFC and LIC Housing Finance Ltd. International Journal of Management (IJM), 7 (3), 201 6, pp. 39 – 49. [8] International Journal of in Multidisciplinary and Academic Research, 4 (1) 1-16. http://www.iaeme.com/IJM/index.asp 270 editor@iaeme.com