ABSTRACT

Purpose: The purpose of this study is to investigate the level of financial literacy among Sri Lankan investors and its impact on investment choices.

Design/methodology/approach: The population of this study consisted of the individual investors of Sri Lanka. Accordingly, a sample of 352 responses were obtained through a survey which was conducted using structured self-administered questionnaire. The independent variable of the research is financial literacy with the dependent variable being the investment choice. Multinomial logistic regression was used to test the hypothesis.

Findings: The results of the study revealed that the majority of investors in Sri Lanka are having low objective and subjective financial literacy. Further, the results revealed that financial literacy has a statistically significant impact on the current and future choice of different investment products as the main source of investment.

Originality: Financial literacy level of individual investors was assessed by using the mean value of the financial literacy score, which has not been commonly used in the Sri Lankan context. This study further contributed to the local body of literature by analyzing the investors’ current main and secondary holdings of seven different investment products and their future investment preference towards these products.

KEYWORDS
Financial literacy, Investment choice, Level of financial literacy in Sri Lanka, Behavioral finance, Investment, Investor

JEL CLASSIFICATION
G11, G53, D83