Financial management behavior among young adults: the role of need for cognitive closure in a three-wave moderated mediation model.

\r\nGabriela Topa*

  • 1 Department of Social and Organizational Psychology, Universidad Nacional de Educación a Distancia, Madrid, Spain
  • 2 Department of Business Economics and Accounting, Universidad Nacional de Educación a Distancia, Madrid, Spain
  • 3 Department of Psychology, University of Bologna, Bologna, Italy

This three-wave study aims to explore whether the impact of investment literacy on the financial management behavior is mediated by investment advice use and moderated by the need for cognitive closure. A total number of 272 financially independent adults, under 40 years, completed questionnaires at three different times with 3-month intervals. The results reveal that employees with more investment advice use and characterized by high need for cognitive closure show a higher level of financial management behavior, in relation to both the urgency (seizing) of getting knowledge and the permanence (freezing) of such knowledge. The present study contributes to better understand how and when investment literacy drives well-informed and responsible financial behavior. According to these results, interventions to improve financial behavior should focus on the combination of investment advice use and metacognitive strategies used by individuals to make financial decisions.


Why are some people more efficient in their financial behaviors than others? Financial management is a complex set of behaviors and decisions that can change as a function of the importance and difficulty of implementing the behavior, as well as of people’s capabilities, skills, and opportunities to perform such behaviors. The undesirable short-, mid-, and long-term consequences of inadequate financial management behavior not only affect individuals, but also their household, and ultimately could produce a wide range of unwanted events on the entire society ( Fenton et al., 2016 ). For instance, inadequate financial behaviors can lead to temporary or chronic debts, inability to pay utility bills or filing for bankruptcy and such behaviors result from economic factors together with psychological ones.

Financial literacy has been defined as “the ability and confidence to use one’s own financial knowledge to make financial decisions” ( Huston, 2010 , p. 307). This concept not only concerns individual investors but also professional ones working in companies that manage money. It is in fact important not only to establish a long-term financial plan but also to know, and to have, financial alternatives in which to invest money or to save it. Financial planning is a very important knowledge and skill considering that individuals live longer and have to save for their old age, when they are no longer working.

Recent studies investigated the impact of financial literacy on various financial behaviors, like loans, mortgages, or retirement planning. The fact that financial literacy is rather low, even across well developed countries, is a critical factor toward well-informed financial decision making and behaviors. Hence, financial behavior management is a topic of interest to economists, social workers and policy makers as well.

However, a large-scale analysis of recent data indicated that financial education interventions explain only 0.1% of the variance in financial behaviors. In contrast, financial literacy has a stronger effect on financial behavior when the former is measured rather than manipulated ( Fernandes et al., 2014 ). However, Fernandes et al. (2014) study shows also that financial literacy has less impact on financial behavior when psychological and social variables, often omitted in previous research, are considered. Therefore, this study aims to fill this gap by taking a psychosocial approach and including cognitive, motivational and social factors in the relationship between financial literacy and financial behavior.

Huston (2010) distinguishes two concepts often considered as synonymous: financial literacy and financial knowledge. A successful measure of financial literacy should allow to identify which outcomes are most impacted by a lack of financial knowledge and skill, and, consequently, allow educators to provide knowledge achieve a desired outcome ( Huston, 2010 ).

In addition, as most of the studies have used samples of students, that is, adolescents or people who are still in their early youth, and not yet financially independent, in this study, we will analyze the financial management behavior of young adults who have their own economic income. Economic independence is in fact a key indicator of transition to adulthood ( Lee and Mortimer, 2009 ).

Based on Huston (2010) theoretical model, this work aims to explore predictors, mediators, and moderators of financial management behavior when people have independent economic resources to save for the future. Specifically, in the present study, we argue that it is necessary to consider the mediating role of investment advice use in the relation between investment literacy and financial management behavior among young adults. As Huston (2010 , p. 307) stated, “financial literacy is a component of human capital that can be used in financial activities” to increase behaviors that enhance financial wellbeing. Hence, financial knowledge would be translated in behaviors by using available resources “directly related to successfully navigating personal finances” ( Huston, 2010 , p. 307), as professional investment advisory services. In addition, we propose that need for cognitive closure (hereafter, NCC), an individual dispositional characteristic, moderates the relations between investment advice use and financial management behavior. The moderated mediation analysis that includes both processes will allow us to better understand the variables that facilitate or hinder young adults’ financial management behavior.

In summary, this study makes three main theoretical and methodological contributions. First, we investigate if the strong direct relationship between financial literacy and financial behaviors is valid when considering two psycho-social variables that consider conditions and types of individuals showing the financial behaviors. Second, we consider younger adulthood, which is a period of individuals’ life-cycle in which many important financial choices start to be made, like buying commodities, a house or setting up a family ( Webley et al., 2002 ). Three, considering what reported by Fernandes et al. (2014) , we investigate if the consistent association between financial literacy and financial behavior observed in many cross-sectional studies is observed also when such independent and dependent variables are measured in different moments.

Financial Management Behavior

Financial management behavior is the acquisition, allocation, and use of financial resources oriented toward some goal. Empirical evidence supports that, if families achieve effective financial management, both their economic well-being and their financial satisfaction improve at the long term ( Consumer Financial Protection Bureau, 2015 ). However, financial management behavior is complex and difficult to implement. The supervision of money and expenditure, which includes frugal and careful spending of money, is a useful protection against risky financial practices.

Moreover, financial management behavior may vary between younger and older people. Although the repeated experience and practice of financial activities influence people’s skills to manage their finances, empirical evidence seems to support that young people practice fewer basic financial tasks, such as budgeting or regularly planning their long-term savings ( Jorgensen and Savla, 2010 ). Because of this evidence, it is of interest to analyze the antecedents of young adults’ financial management behavior.

Investment Literacy

Investment literacy implies, firstly, an accumulation of knowledge about personal concepts and financial products, obtained by means of education or direct experience. Secondly, it includes a series of abilities and self-confidence to effectively apply the knowledge to the management of one’s own finances. Different empirical works have shown the consistent relations between the specific financial knowledge, the probability of saving, the effectiveness of investment strategies, and saving behaviors in general ( Jorgensen and Savla, 2010 ). Hence, considering we measured our variables at three points in time, we propose that:

Hypothesis 1: Investment literacy at time 1 (hereafter T1) will be positively related to financial management behavior at time 3 (hereafter T3).

Investment Advice Use

The use of financial consultants has been proposed as a useful support to financial decisions and as a substitute of financial knowledge and capacity for individuals and family with lower resources. However, Collins (2012) shows that financial literacy, and search and use of professional advice, are not only distinct and complementary processes, but also positively related, because results show that individuals with higher incomes, better educated and with more financial literacy are the most likely to search and use financial advice. Individuals that are less knowledgeable tend to overestimate their abilities and are unable to recognize their limited financial competences ( Kruger and Dunning, 1999 ). However, other studies show that the use of financial consultants seems to have a direct influence in guiding individuals and families toward more profitable investments ( Joo and Grable, 2004 ). In the light of this evidence, we argue that individuals financially competent, aware of the complexities of the economic field, may search for, understand and then implement the advices provided by financial consultants and, consequently, show good financial management behaviors. Accordingly, we propose that:

Hypothesis 2: Investment advice use at time 2 (hereafter T2) will mediate the relationship between investment literacy at T1 and financial management behavior at T3.

Need for Cognitive Closure

Although some empirical studies have addressed the influence of personality on earning and saving, most of them have focused on psychological biases, self-control problems, procrastination ( Rahimi et al., 2016 ), future time perspective and risk tolerance ( Pak and Mahmood, 2015 ). However, other studies have called attention to the influence of relatively stable individual differences in information processing and complex decision making, such as the NCC ( Webster and Kruglanski, 1994 ).

Need for cognitive closure refers to the individual necessity of arriving to a clear and definitive opinion, or answer to a problem, and particularly any opinion or answer rather than experiencing confusion, ambiguity or inconsistency ( Webster and Kruglanski, 1994 ). Empirical research reports significant differences between people with high and low NCC; such differences concern the amount of information they can process, the intensity of that information, the rules employed in decision-making processes, and the self-confidence on the decisions that they reached ( De Dreu et al., 1999 ; Szumowska and Kossowska, 2017 ). Due to this characteristic, people with low NCC are more available to consider complex information that is difficult to process, such as financial information. They are also concerned about the loss of information and more oriented toward the accuracy of the response than to the speed with which it is reached. As a consequence, these people tend to consider more information and decide more slowly, to be more open minded and more creative. In contrast, people with high NCC are more likely to focus on information they can process easily, to reject the more complex or even incomplete one ( Livi et al., 2015 ), and less likely to consider new evidence and update their investments when changes in market uncertainty appear ( Disatnik and Steinhart, 2015 ).

Need for cognitive closure has been described as characterized by two different tendencies: the tendency of the urgency to achieve knowledge ( Seizing ) and the tendency to retain permanently that knowledge ( Freezing ) ( Roets et al., 2006 ). People with high NCC have a pressing desire to achieve closure and to retain it permanently. Thus, these people tend to limit the quantity of information to be processed in order to facilitate decision-making and then to retain and perpetuate the information on which they have based this judgment.

This pattern of information processing has been shown in a broad array of situations related to information processing and decision-making ( Dolinski et al., 2016 ), such as consumer purchasing choices, attitudes about complex technological products, suppliers’ purchasing decisions to manage business supply chains, or helping behavior, among others. Due to the fact that financial management behavior includes processing of complex information and the anticipation of needs with a high degree of uncertainty, we argue that individuals with high NCC will consider a limited amount of information provided by the financial consultant, and particularly information that solve their immediate needs; will revise or modify such information with some reluctance, and all this will result in a less efficient financial management behavior. In contrast, we expect that low NCC remain open to information provided by the consultant and, through the elaboration, integration and revision of such information, they will be more consistent and efficient in the management of their financial behavior. Accordingly, in the present study, we propose that:

Hypothesis 3: The relationship between investment literacy at T1 and financial management behavior at T3, mediated by investment advice use at T2, will be moderated by both NCC dimensions (seizing and freezing) at T1. Specifically, we expect the relationship between investment advice use (T2) and financial management behavior (T3) to be weaker for individuals with high levels of both NCC dimensions (T1) than for individuals with low levels of both NCC dimensions (T1).

Materials and Methods

Ethics statement.

The Institutional Ethics Committee of the first and second authors’ university (National Distance Education University, UNED) approved this research on May 4th, 2016.

Participants and Procedure

This study, with a three-wave design, was carried out with a sample of young, non-student, Spanish adults, who completed the questionnaires at three different moments (T1, T2, and T3), with an interval of 3 months between each one. Following Taris and Kompier (2016) suggestions, and due to the limited longitudinal studies available on these factors, the real time lag between these factors is unknown; considering literature and the processes under examination, we retain the 3 months as an appropriate period to explore such relations. Also, because the time-lag design contributes to control and counteract the common method variance ( Podsakoff et al., 2003 ). The T1 measurement was carried out in January–February. Participation in the study was voluntarily, and potential participants were informed about the anonymity, and all subjects gave their informed consent for inclusion before they participated in the study. The only inclusion criteria in the study were being younger than 40 years of age and having a paid job (being full time or part time active workers). A total 500 people were invited to participate at T1, but we only obtained 390 responses (78% response rate), and 304 responses at T2. At T3, the sample was reduced to 272 respondents, who are included in this study. The mean age of the participants at T1 was 26.3 years ( SD = 4.9), and at T3 mean age was 26.8 years. Men made up 40.4% of the sample. Average job seniority was 9.9 years ( SD = 6.6). In terms of educational level, 57% of the sample had received a university or similar level of education, 29% finished the Secondary School, and 11% had received only basic education. Professionally, 63.2% of participants were employees, 22.8% were middle managers, and full-time workers accounted for 91.9% of the sample, and the rest were employed part-time.


Financial management behavior was assessed with the Financial Practices Scale ( Loibl et al., 2006 ), consisting of seven items that measure the probability of the participants’ adopting positive practices of financial management behaviors. The Likert-type response scale ranged from 1 ( unlikely ) to 5 ( very likely ). Examples of some items are: “Pay your bills on time every month”; “Start saving for emergencies”; “Develop a written plan for expenses”; “Have more organized records of payments.” The authors recommend adding the scores to create a global measure of financial management behavior. Reliability was α = 0.78 in the present study.

Investment literacy was appraised with the Financial Knowledge Scale , of Joo and Grable (2004) . This 10-item scale was designed to assess investors’ financial literacy. Higher scores indicate more knowledge. The original dichotomic response scale was transformed into a Likert-type response scale ranging between 1 ( strongly disagree ) and 5 ( strongly agree ). Examples of some items are: “Both employee and employer contribute to Social Security”; “Over a 20-year period, one is more likely to win than to lose money in the stock market”; “Interest paid on a credit card is deducted from taxes” (reversed score). Reliability was α = 0.81 in the present study.

Investment advice use was assessed using the Investment Advice Use Scale of Li et al. (2002) which contains eight items. The original four-point response scale, which ranges between 1 ( strongly disagree ) and 4 ( strongly agree ), was adapted to a five-point Likert-type format, with an intermediate rating for indifference ( neither disagree nor agree ). Examples of items are: “I prefer to consult with a specialist when I take financial decisions”; “I would be willing to pay for the advice of a financial expert”; “I feel qualified to make my own investment decisions without advisors” (reversed score). Reliability was α = 0.77 in the present study.

Need for cognitive closure was assessed with the Need for Cognitive Closure Scale , in its translated version ( Mannetti et al., 2002 ), adapted to Spanish by Ramelli (2011) . This scale has two factors: Seizing (predisposition to seek an immediate response when faced with uncertainty) and Freezing (predisposition to retain closure and avoid considering new information that might question it). The scale has 14 items that are rated with scores ranging between 1 ( strongly disagree ) and 5 ( strongly agree ). Reliability of the Spanish version was adequate, both in the original study (with α = 0.78; Ramelli, 2011 ), and in the present study (with α = 0.78). Examples of seizing (urgency) items are: “In case of uncertainty, I prefer to decide immediately, whatever it may be”; “When I have several potentially valid alternatives, I decide in favor of one quickly and without hesitation”; “After finding the solution to a problem, I think it is a waste of time to take other possible solutions into account.” Item examples of the freezing (permanence) dimension are: “I feel very uncomfortable when things are not in their proper place”; “I feel uncomfortable when I do not get a fast answer to a problem I face.” The NCC scale was subjected to Confirmatory Factor Analysis with Amos 24.0. The generalized least squares procedure was used. This two-factor CFA fitted the data reasonably well (χ 2 = 139.199, p < 0.000; df = 71, CMIN/df = 1.96; GFI = 0.93; AGFI = 0.90, RMSEA = 0.06).

All the factor loadings for the items exceed the 0.40 and both factor correlated as expected (0.72). Some covariances among error have been allowed due to the similarity of the item content, but in any case, between items included under the same factor. Factor loadings, and the Spanish formulation of items, are displayed in Table 1 .


TABLE 1. Need of Cognitive Closure Scale ( Ramelli, 2011 ) and factor loadings.

Analytic Strategy

In order to test the study hypotheses, we performed a linear regression analysis. Before testing the hypothesized moderated mediation model, the indirect and moderating effects were first tested separately with the PROCESS macros for SPSS 24 ( Hayes, 2013 ). With bootstrap procedures of 5,000 samples at a 95% confidence level, the confidence intervals that do not contain 0 indicate that the indirect effect is significant. We did not include any control variables in the following analyses.

Descriptive statistics and Pearson correlations between the study variables are provided in Table 2 . Investment literacy was positively and significantly associated both with investment advice use ( r = 0.19) and with financial management behavior ( r = 0.31), whereas investment advice use and financial management behavior showed the strongest correlation ( r = 0.41). The relation between freezing and financial management behavior reached statistical significance ( r = 0.16). NCC dimensions showed a positive relationship with each other ( r = 0.44).


TABLE 2. Descriptive statistics and correlation matrix.

Table 3 shows the results obtained when testing the first hypothesis. The linear regression analysis shows the total effect ( b = 0.17, p < 0.000) of investment literacy on financial management behavior [ R 2 = 0.22, F (2,269) = 37.54, p < 0.001].


TABLE 3. Regression results of testing the mediation of investment advice use (T2) in the relationships between investment literacy (T1) and financial management behavior (T3) (hypotheses 1 and 2).

Regarding the mediation of investment advice use in the relationship between investment literacy and financial management behavior, a significant and positive association between investment literacy and investment advice use ( b = 0.20, p < 0.000) was observed. Furthermore, a statistically significant direct effect of investment literacy on financial management behavior ( b = 0.16, p < 0.001) was found, as well as a statistical significant effect of investment advice use on financial management behavior ( b = 0.23, p < 0.001). Hence, there is a significant indirect effect of investment literacy on financial management behavior through investment advice use ( b = 0.05). Finally, we tested the significance of this mediation effect through the bootstrapping procedure, which showed that the confidence interval for the indirect effect does not contain zero [0.01, 0.09], supporting the significance of the mediation effect. These results provide reasonable confirmation of hypothesis 2.

Finally, we tested hypothesis 3 following the procedures recommended by Hayes (2013) , as shown in Table 4 .


TABLE 4. Results of testing the moderation of NCC (T1) on the investment advice use (T2) – financial management behavior relationship (T3) (hypothesis 3).

Firstly, Table 4 shows a negative direct effect between NCC – seizing and financial behavior ( b = -0.32, p < 0.05), which suggests that the higher the tendency to seek an immediate solution to solve an uncertainty, the lower the management of financial behavior. Secondly, upon testing hypothesis 3 regarding the moderating effect of seizing on the relationship between investment literacy and financial management behavior, mediated by investment advice use, we found a statistically significant positive interaction effect ( b = 0.12, p < 0.01). Thirdly, regarding the moderating effect of freezing on the relationship between investment literacy and financial management behavior, mediated by investment advice use, we also found a statistically significant positive interaction effect ( b = 0.12, p < 0.01). The index of moderated mediation for the seizing dimension was 0.024 ( SE = 0.013), while the 95% confidence interval with bootstrapping of 5,000 samples did not contain zero (Boot CI [0.003, 0.059]), and for the freezing dimension, the index was 0.023 ( SE = 0.013, Boot CI [0.002, 0.059]).

Hence, the data support hypothesis 3. The indirect conditional effects of investment literacy on financial management behaviors at the two levels of the moderators are displayed in Table 5 , where the effect of investment literacy on financial management behavior was strong at the high level of NCC (seizing and freezing), and it was correspondingly weak when NCC was low. The two effects are statistically significant although in the opposite direction that was expected.


TABLE 5. Results of testing moderated mediation of NCC dimensions in the relationship between investment literacy (T1) and financial management behavior (T3).

Figures 1 , 2 depict the moderation effect of both NCC dimensions. What they show is not consistent with our expectations: individuals reporting higher investment advice use also showed a greater level of financial management behavior if they were characterized by high NCC-seizing at T1 (see Figure 1 ).


FIGURE 1. Moderation of NCC-Seizing (T1) on the investment advice use (T2) – financial management behavior (T3) relationship.


FIGURE 2. Moderation of NCC-Freezing (T1) on the investment advice use (T2) – financial management behavior (T3) relationship.

Also, contrary to our expectations, respondents reporting higher investment advice use at T2 showed a greater level of financial management behavior at T3 if they were characterized by high NCC freezing at T1 (see Figure 2 ).

Taken together, this result implies that investment advice use (T2) mediates more strongly the relationship between investment literacy (T1) and financial management behavior (T3) for young adults characterized by moderate to high levels of NCC (T1) than in adults with lower levels of NCC (T1). These results are depicted in Figure 3 .


FIGURE 3. Results of the moderated mediation analysis. NCC, need for cognitive closure; [95% CI]; ∗ p < 0.05, ∗∗ p < 0.01, ∗∗∗ p < 0.001. Values in italics: correspond to the Freezing dimension.

The present work supports the hypothesis that investment literacy may affect subsequent financial management behavior in young, financially independent, adults. These findings corroborate the key assumption of a long research tradition that links financial literacy with the improvement of financial management behavior. In addition, the present investigation suggests that efficacious financial management should not be conceived as only a mere consequence of knowledge and confidence to use it, but rather as the outcome of the joint influence of cognitive aspects and social influences that affect individuals. In fact, in the present work, the impact of investment literacy on financial management behavior is explained by the use of investment advices provided, in a social communication exchange, by a financially expert advisor. Therefore, the present study has focused on facets predominantly studied in current economic psychology ( Webley et al., 2002 ).

Following the growing number of works suggesting that personality traits affect financial behavior beyond the influence of people’s knowledge and external factors ( Norvilitis et al., 2006 ; Warmoth et al., 2016 ), this work shows that NCC plays a moderating role in the relation between investment literacy and financial management behavior, mediated by investment advice use. Thus, our evidence shows how the personal tendencies of seizing and freezing influence predictors of financial management behavior. On this regard, results show a two side picture. From one side, as we expected, seizing is negatively related to financial behavior; which suggests that individuals with higher tendency to reach quickly a knowledge, a solution to some financial problem, the lower the rate of financial practices. On the other side, contrary to our expectations, individuals that look for financial advice and with high NCC, both for seizing a solution and for freezing it, probably accept quickly the suggestion from the advisor and start to implement it consistently and repeatedly, thus improving their financial performance, in comparison to individuals with lower NCC that may take longer to implement the advice provided by the financial advisor.

This work presents a new viewpoint of how to improve financial behavior among youth and, therefore, can contribute to increasing the efficacy of early interventions to develop responsible financial behavior ( Gariepy et al., 2017 ). Firstly, confirming previous studies (e.g., Calcagno and Monticone, 2011; Collins, 2012 ), it seems that to benefit of financial advice it is, at least, useful (if not, necessary), to have a good level of financial literacy. Thus, educational, social and political systems should consider how to create opportunities for young adolescents to experience and practice financial competences. Secondly, in this same line, intervention strategies should be oriented toward increasing the coherence between knowledge, expert advice, and financial management behaviors to practice the specific behaviors of saving and investment during young adulthood. Translating this into concrete practices, early assessment of people’s tendencies of Seizing and Freezing could help to recognize these early propensities and their potential bias in the processing of financial information. For example, special attention should be paid during adolescence to these psychological traits to help people develop strategies that compensate these tendencies and reduce their potential negative impact on processes of making complex decisions which may require more time for the analysis and processing of more complex information ( Gerlach, 2017 ). Following these recommendations, parents and educators can develop training programs specifically designed to offset those biases.

Thirdly, while the relationship between investment advice use and financial management behavior is not questionable, the present findings indicate that the quality and quantity of the effects are influenced by employees’ NCC tendencies. According to the present findings, financial advisors might rely upon a complementary tool to increase the efficacy of their interventions. In particular, by monitoring the level of NCC of investors, they may provide some customized services. This would support the idea that not all the products or services fit all the customers, but rather that professionals should fine tune their work in relation to investors’ need to remain open or to close and fix the financial suggestions that are provided. If high NCC individuals might be efficient in implementing easily and quickly the advices provided to them, it is also necessary to remind them of the need to continue to search regularly the advices, to update, and modify financial choices that might become outdated and no more matching the financial situation of the market. In comparison, they must present much wider and more complex financial solutions to low NCC investors, to satisfy their need for extended information processing and thus, facilitate their passage to the actual and concrete financial behavior.

This study presents some limitations that should be considered. Firstly, even though we have considered some cognitive, social, and personality variables in accordance with Huston (2010) model, many other variables could have been considered and should be considered in future research. When referring to long-term economic planning, young workers’ expectations about occupational security, career development, promotion, and progress might also influence their financial management behavior ( Ekici and Koydemir, 2016 ).

Secondly, in this study we measured financial management behavior by tapping participants’ perceptions of their behavior; future studies should include real daily behaviors (e.g., checking one’s bank account, making a monthly budget, controlling credit card expenditures), for example, using research procedures like day reconstruction methods or experience sampling.

Thirdly, in this study we used a 3 months’ lag time between each wave and the following. This lag time allowed anyway to detect a significant relationship between financial literacy and use of financial advice, and between this latter and financial behavior. However, time between waves might be extended to investigate how long is the effect of financial literacy on investment advice, and especially how long such advices may affect financial performance. Fourthly, another limitation is that investment literacy was included only at a first point in time, precluding the possibility of establishing the reverse causation between behavior and knowledge. A research design including the same three variables in each wave, will allow to investigate if, for instance, it is an underperforming financial situation to stimulate the search of financial advices.

Fifthly, in this study, we did not deal with attitudes toward financial professionals, such as customers’ trust and anxiety when consulting them ( Grable et al., 2015 ). In future studies, one might directly ask participants what they think and feel about their financial advisors and incorporate this information as a moderating variable.

Finally, financial literacy studies in general showed another limitation that is due to the well-known association between lower literacy with poor health, low income, and other undesirable outcomes but, as with the present findings on financial management behavior, there is not enough evidence to support any causal direction ( Ma, 2016 ). To date, little is known about the causes and correlates of wrong financial decisions during the life course ( Budowski et al., 2016 ). This kind of knowledge needs to be improved, despite the difficulty of obtaining information from the participants regarding their wealth, financial literacy, and consumer behaviors, and this study does not escape to similar challenges and gaps in data ( Manske et al., 2016 ).

However, this investigation can provide some suggestions to guide future research. First, although we did not examine the impact of gender on financial literacy and financial behavior, it seems that gender differences are related to the quality of financial decisions, even though women’s levels of financial literacy and economic income have improved regarding past decades ( Heilman and Kusev, 2017 ). Therefore, investigating the relationship between gender and NCC could help educators in general, and financial advisors, to design intervention strategies to help women to achieve efficacious financial management ( Rudzinska-Wojciechowska, 2017 ).

Second, research seems to indicate that NCC and risk intolerance are associated. Specifically, risk intolerance is a widely studied variable in the financial setting, but the antecedents of intolerance of risk and ambiguity are still unclear. Therefore, a possible link with NCC could be analyzed, as has been shown in an experimental study ( Vermeir and van Kenhove, 2005 ).

Third, research indicates that executive functions such as impulse control, attention regulation or mental flexibility could be linked to NCC ( Dolinski et al., 2016 ) and to performance in complex tasks and financial well-being. However, recent studies related to the executive functions show that they develop throughout adolescence. Accordingly, early intervention with youth could contribute to improving these cognitive functions, with their consequent influence on NCC and subsequent benefit for the management of complex behaviors, like finances ( Barnhoorn et al., 2016 ; Urquijo et al., 2016 ).

Lastly, NCC and its correlates of ambiguity intolerance and risk aversion have always been analyzed from an individual perspective. However, recent works propose the possible influence of social comparison in decision making in general and, specifically, in risk-taking behavior ( Wang et al., 2016 ). In this sense, it would be interesting to analyze in future works the influence of the social gains of decisions and their possible interaction with the decision-makers’ NCC.

Financial literacy and decision making should be further explored to better understand how health and well-being are influenced by them during the life course. This research could help societies and policy makers to reduce the considerable economic and public health challenge that posed fast population aging, associated with low financial knowledge and overconfident decision making ( Khan et al., 2016 ). Ultimately, such data will guide interventions to improve literacy and promote independence, wealth, health, and well-being among people from young adulthood to old age.

Author Contributions

GT, MH-S, and SZ designed the research, analyzed the data, and wrote and revised the manuscript. GT collected the data.

Conflict of Interest Statement

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

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Keywords : financial management behavior, investment literacy, investment advice use, need for cognitive closure, retirement, retirement planning

Citation: Topa G, Hernández-Solís M and Zappalà S (2018) Financial Management Behavior Among Young Adults: The Role of Need for Cognitive Closure in a Three-Wave Moderated Mediation Model. Front. Psychol. 9:2419. doi: 10.3389/fpsyg.2018.02419

Received: 26 July 2018; Accepted: 16 November 2018; Published: 30 November 2018.

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Copyright © 2018 Topa, Hernández-Solís and Zappalà. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) . The use, distribution or reproduction in other forums is permitted, provided the original author(s) and the copyright owner(s) are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

*Correspondence: Gabriela Topa, [email protected]

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Some key developments in international financial management

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  • Published: 29 June 2021
  • Volume 91 , pages 595–615, ( 2021 )

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  • Santiago Ruiz de Vargas   ORCID: orcid.org/0000-0002-3349-4874 2  

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1 International financial management and valuation: an important field of financial research

International financial management is about investment and financing decisions confronting the management of multinational companies due to the international context of their activities. Investment and financing decisions involve the valuation of uncertain future cash flows (Ross 2004 , p. 1). A key element of the international context is that these decisions are affected by exchange rate risk. Therefore, the methodology used to support rational decision making in an international context must capture the additional complexity that exchange rate risk and exchange rate forecasting pose.

Forty years ago, in a special issue of this journal, the areas of research pertinent to international financial management were addressed (Stehle 1981 , pp. 75–76) and a status report on the theory of international capital markets was given (Franke 1981 , pp. 51–66). After four decades, this special issue presents articles of current interest that address important aspects of the research field of international financial management and valuation. But before presenting these, we would like to offer a brief update on where we stand today in the field of international financial management.

In these 40 years, the number of countries and currencies has increased substantially, to more than 220 countries with more than 150 currencies as of the beginning of this decade. Footnote 1 The world has experienced rapid internationalization and widespread integration of capital markets (e.g. Obstfeld and Taylor 2004 ; Das 2004 , 2006 ; Frieden 2020 ). This has caused business and investor cross-border activities to experience enormous expansion. Trading volumes on international capital markets have been boosted considerably, and the array of available financing instruments has substantially increased. The triennial central survey of the Bank of International Settlements reports a daily total OTC foreign exchange turnover of US$ 6.6 trillion for April 2019 (“net-net” basis, Bank for International Settlements 2019 , Table 1, p. 1) in comparison to US$ 0.6 trillion in April 1989, i.e. three decades earlier (grand total, Bank for International Settlements 1996 , p. 3).

The framework for investment and financing decisions in an international context is given by the international monetary system and the integration, depth and breadth of international financial markets. Of course, the growing integration of real goods and services markets and the intensity of international trade also play an important role in international financing and investment decisions. Since the breakdown of the Bretton Woods system of fixed exchange rates 50 years ago, most developed countries have adopted a free float, and a comprehensive liberalization of capital and current-account transactions has taken place. This still reflects the current overall trend (see International Monetary Fund (IMF) 2020 , p. 3). However, some developed countries in Europe introduced a common currency in 1999, the euro, thus establishing a fixed-rate regime for their common market, while accepting a free float of their currency in relation to countries outside this monetary union (Baldwin and Wyplosz 2020 ; Brasche 2013 ; Wagener and Eger 2014 ). Consequently, managing exchange rate risk and forecasting future exchange rates have become essential aspects of international financial management decision making since the breakdown of the Bretton Woods system.

These developments have been accompanied by wide-ranging theoretical and empirical research on international financial management, most of which applies and extends the concepts and methodology that have been developed in financial economics. In particular, a theory of international capital markets establishing equilibrium conditions based on the absence of arbitrage (see e.g. Ross 2004 ; Kruschwitz and Löffler 2020 ; Franke and Hax 2009 ) has been developed (Solnik 1974 ; Grauer et al. 1976 ; Mehra 1978 ; Sercu 1980 ; Stulz 1981a ; Adler and Dumas 1983 ; Ross and Walsh 1983 , among others).

In the next section, we will give a brief overview of the relevance of internationally related topics at the annual meetings of the European Finance Association (EFA). It shows that aspects of foreign exchange management and valuation issues play a crucial role in papers on finance with an international focus. Against this background, we will take a closer look at the contents of a selection of important textbooks on international financial management in Sect.  3 . Section  4 presents this special issue’s four papers, and Sect.  5 concludes.

2 International finance at the annual meetings of the European Finance Association

Just to get an idea of the importance of the international dimension in the field of finance, we have taken a look at the annual meetings of the EFA from 2009 to 2020. Along with the annual meetings of the Western Finance Association and the American Finance Association, the EFA conferences are some of the most prestigious worldwide. On average, around 232 papers are presented at each annual meeting, of which around 5.78% have a pronounced international focus as highlighted by the term “international” in their title, their key words, or their session heading. This does not rule out the possibility of an international “flavor” in some of the other papers. Nevertheless, in such cases, this typically will not be the main focus of the respective study. Rather interestingly, this percentage of papers as identified according to our criteria as “internationally related” was somewhat higher from 2009 to 2014 (6.8%) than from 2015 to 2021 (4.8%). However, these figures are generally quite stable over time. The number of downloads of these contributions that are available at the Social Science Research Network is almost the same. This means that papers with an international focus are of rather “average” interest for the scientific community.

We started with a co-occurrences analysis of paper titles, highlighting which words commonly occur together. Figure  1 documents the results for the entire timespan from 2009 to 2020 as well as for the two subperiods 2009–2014 and 2015–2020. It shows that, in addition to the relatively isolated field of monetary policy, most paper titles seem to center around topics related to foreign exchange, currency, market risk, and asset prices.

figure 1

Bi-grams of EFA conference papers on international finance. This figure shows the most common word pairs in working paper titles presented at EFA conferences between 2009 and 2014 as well as between 2015 and 2020. The number n of co-occurrences is indicated by the thickness of the connection lines; the most common words are located in the center

In order to gain additional insights, we applied the state-of-the-art machine learning method “Latent Dirichlet Allocation” (LDA) (Blei et al. 2003 ) to the abstracts of the EFA conference papers separately for the papers presented from 2009 to 2014 and those presented from 2015 to 2020. The LDA is an advanced textual analysis technique that views each abstract as a union of topics and each topic as a union of words. This approach mimics human language processing, as it classifies documents into natural groups without any pre-specified topics. The LDA applies mathematics to reduce the dimensionality of datasets and thus is similar to a factor analysis (Dyer et al. 2017 ). This reduction is achieved by defining a topic as a collection of words where each word is assigned a probability of belonging to a topic. Thus, the LDA connects documents with probability distributions belonging to topics, so that one document can contain several topics. We restricted our analysis to identifying the five main topics for both subperiods.

The results are shown in Fig.  2 , which lists relevant topics and their most important words. One problem is that we have to determine a suitable heading for each topic “manually”, as this cannot be generated automatically. Our suggestions are also presented in Fig.  2 . For each topic of our two subsamples, Fig.  3 presents the probability γ that a given abstract deals with a given topic. For most topics, it is an either-or decision whether a paper is assigned to this topic, since probabilities are usually close to 0 or 1.

figure 2

LDA analysis of EFA conference papers on international finance. This figure shows the top 8 words for each of the 5 topics found by the LDA (Latent Dirichlet Allocation) in the abstracts of all papers from 2009 to 2014 (Panel A ) as well as from 2015 to 2020 (Panel B ) presented at the EFA conferences. Each word is connected with a probability β of that word belonging to that topic

figure 3

Probability of an abstract belonging to a topic. This figure shows the probability γ that an abstract from the EFA conference papers belongs to a specific topic. The y-axis counts the number of abstracts and is log(10) scaled. Results in Panel A are based on all papers presented at the EFA conferences between 2009 and 2014, while Panel B analyzes papers from 2015 to 2020

If we restrict our examination to those papers which can be assigned to one topic with a probability of at least 80%, we get the following frequency distribution for 2009–2014: asset pricing (11.11%), currency risk models (13.33%), global portfolio management (21.11%), investment management (22.22%), and U.S. banking crisis (20%). Of the 89 papers, 12.22% could not be assigned to one of these five categories with sufficient precision. The corresponding results for 2015–2020 are: asset pricing (23.19%), bank risk taking (17.39%), corporate debt financing (15.94%), currency risk models (17.39%), and mergers and acquisitions (17.39%). For 8.70% of the 69 papers, it was not possible to determine just one dominant topic with sufficient precision.

As financing and investment decisions are also closely related to valuation and risk issues, we will rely primarily on these aspects for our analysis of textbooks in the next section.

3 Insights from recent textbooks on international financial management

While it is impossible to present all of the developments in international financial management made in the last four decades, the fruits of this theoretical and empirical research can be found in numerous textbooks and handbooks that cover investment and financing decisions in an international context.

We conducted a literature review on current textbooks and handbooks on international financial management. In order to reflect an up-to-date perspective of current knowledge on international financial management, we have restricted our review to books published in the last 20 years that we are aware of. Footnote 2 To keep the assessment manageable, books on international macroeconomics, international business or international management have been excluded. Of course, the resulting sample of literature is selective and incomplete. Footnote 3 Nevertheless, in our opinion, the resulting sample of 14 textbooks reflects the current state of basic knowledge on international financial management that academics deem necessary to convey to future researchers and practitioners (see also Boland 1997 , pp. 109–110).

Our, admittedly rather limited, literature review aims to answer the following key methodologically driven questions on international finance: (1) What theoretical framework is presented for exchange rate determination and forecasting? (2) What exchange rate forecasting method is applied when presenting valuation examples? (3) What valuation methods do textbooks propose for conducting cross-border valuations? (4) What method is proposed to calculate the cost of equity? (5) How do the textbooks evaluate the hypothesis that the home currency and foreign currency approaches are equivalent? Footnote 4 We acknowledge that these five questions are not at all comprehensive, and that other interesting questions have not been considered. However, we believe that the questions addressed in our review are highly relevant in a vast majority of practical and empirical cases.

Table 1 presents the results of our limited literature review on the first two questions regarding the methodology used to forecast future exchange rates.

The sample of currently available textbooks presented in Table 1 emphasizes the relevance of exchange rate determination and forecasting and uses international parity relations (IPR) as the relevant theoretical framework. Footnote 5 In contrast, textbooks on international financial management available shortly before and after the breakdown of the Bretton Woods regime did not cover this area. Footnote 6 With a free-float regime, it became more and more necessary to forecast exchange rates (see Giddy and Dufey 1975 ). Footnote 7 An early coherent presentation of international parity conditions as an integrated theory of exchange rate equilibrium based on expectations can be found in Giddy ( 1976 ), Aliber ( 1978 ), and Roll and Solnik ( 1979 ). This framework still underpins the theoretical exposition of the current textbooks presented in Table 1 . Our sample confirms that the theoretical foundation of exchange rate determination and forecasting based on international parity conditions has remained the relevant paradigm since the breakdown of the Bretton Woods system of fixed rates.

In line with the efficient market hypothesis (EMH), Giddy ( 1976 ), p. 883, concluded some years after the breakdown of the Bretton Woods system that interest differentials and forward rates provide “the best forecast of the future spot rate”, respectively. Footnote 8 In current textbooks, the prevalent forecasting method still appears to be the market-based approach, i.e. using forward rates as a direct predictor of future exchange rates when assuming risk neutrality or as the certainty equivalent of future exchange rates when assuming risk aversion. In the latter case some textbooks indicate that, due to small risk-premium estimates, the risk aversion case and the risk neutrality case deliver similar forecasts. However, several textbooks refer to their own or third-party empirical work in the last decades, indicating weaknesses and exchange rate anomalies in contradiction to economic theory. These affect not only the uncovered interest rate parity (“forward premium puzzle”; for a comprehensive review see Miller 2014 ), but other parity conditions as well (for the purchasing power parity (PPP) puzzle, see Rogoff 1996 ). These and other anomalies still challenge economic theory on exchange rate determination and forecasting (e.g. Obstfeld and Rogoff 2000 ). The volatility of exchange rates and these empirical findings make it clear that no forecasting method can promise ex ante forecasting infallibility (Rossi 2013 ). Research reported in these textbooks also shows that, where profitable trading strategies taking advantage of these anomalies are discovered, the anomalies tend to disappear once transaction costs and risks are considered.

Shapiro and Moles ( 2014 ) point out that exchange rate forecasting is to be viewed in relative terms and that any alternative currency forecasting model should be required to outperform “the market’s estimates of currency changes” (p. 169). This is still a “daunting task” (Fama 1998 , p. 284). While alternative approaches to UIP or relative PPP are presented in the textbook literature we reviewed (see Table 1 ), the textbooks do not claim that these alternative approaches can consistently “beat the market”. As Jacque ( 2020 ), p. 470, puts it: The “lack of a definitive answer to the general question of forecasting exchange rates, […], is probably one of the most potent justifications for undertaking costly and at times highly constraining hedging policies against foreign exchange risk.” Thus, exchange rate risk is intertwined not only with exchange rate forecasting, but also with hedging decisions based on it. As a consequence, the distinction between fallacious and valid reasons to hedge (e.g. Levi and Sercu 1991 ) and a proper measurement of currency risk (Adler and Dumas 1984 ; O’Brien 2019 ) is key for sound exchange rate risk management.

Interestingly, in the textbooks we reviewed, it appears that only Sercu ( 2009 ) and Apte ( 2009 ) emphasize the role of the forward rate as a certainty equivalent of the future exchange rate. Based on this, Sercu ( 2009 ) proposes using the forward rate as a guide for commercial and financing decisions (p. 193), as well as for accounting purposes (pp. 190–192). While his proposal of using the forward rate instead of the spot rate in accounting is probably at odds with most accounting standards, this approach treats the decision not to hedge in the same way as the decision to hedge and provides an economically sound division of profits into operating income and financial income. It remains to be seen if his proposal is picked up by standard setters.

Most textbooks briefly present technical analysis and fundamental analysis as additional exchange rate determination and forecasting approaches. Fundamental analysis aims to identify causality relationships that determine the current spot rate based on economic factors. As Eun and Resnick ( 2018 ), pp. 160–161, show, based on a monetary approach, in order to produce a forecast for an exchange rate with a fundamental method, the values to be estimated are not the current values, but the future values of the independent variables. This substantially exacerbates the exchange rate forecasting problem for practical applications due to expanding data requirements in order to estimate an array of variables to formulate a forecast. The rather frequent, albeit usually brief, inclusion of technical analysis, a practitioners’ tool that defies economic fundamentals and the market efficiency concept, is somewhat surprising and probably can only be explained by its relevance to short-term forecasting for many foreign exchange professionals (see Menkhoff and Taylor 2007 , for a comprehensive review). Footnote 9

Table 2 presents the results of our limited literature review on the third to fifth questions in international finance and shows that there is a clear preference for the adjusted present value (APV) method developed by Myers ( 1974 ) over the weighted average cost of capital (WACC) or the flow-to-equity (FTE) approaches. The latter method is only mentioned occasionally. This preference for using the APV approach in an international valuation setting can be traced back to Lessard ( 1985 ). The reasoning is that an international context must reflect different value components of financing side effects (e.g., different currencies, taxes, and subsidies). It is surprising that, in standard textbooks, the advantages of the APV approach (assuming predetermined debt levels) are not highlighted correspondingly, since these advantages do not apply exclusively in an international context. Footnote 10 Most of the textbooks deem it necessary to consider an additional value component resulting from real options that may stem from a capital budgeting problem in an international context, while the difficulties of applying this concept in practice are usually not discussed (e.g. Kruschwitz and Lorenz 2020 , pp. 362–401).

The equivalence of the home currency and foreign currency approaches is only addressed in some of the textbooks, while applying different sets of assumptions. Apte ( 2009 ), Bekaert and Hodrick ( 2018 ), Buckley ( 2012 ), Butler ( 2016 ), Click and Coval ( 2002 ), Levi ( 2009 ) and O’Brien ( 2017b ) show under what conditions the equivalence holds and how differences may indicate the incurrence of a speculative financial position that should not be confused with an operative investment decision.

To estimate the cost of equity, nearly all textbooks advocate the use of the capital asset pricing model (CAPM) in an international context. Footnote 11 To capture the international context in integrated capital markets, the use of the global CAPM is preferred to the more complex version, the international CAPM with additional currency risk factors. Footnote 12 Some textbooks, such as Sercu ( 2009 ), O’Brien ( 2017b ) and Bekaert and Hodrick ( 2018 ) present the international CAPM that incorporates exchange risk as a separate risk factor in addition to the market risk factor of the global CAPM. Footnote 13 Only Jacque ( 2020 ) adds a separate ad hoc country risk factor in the global CAPM. Footnote 14 Other textbooks propose capturing country risk with a scenario analysis at the cash-flow level (e.g. Levi 2009 , p. 435). Market-segmentation effects on the cost of equity consistent with the CAPM are only treated occasionally. Eun and Resnick ( 2018 ) propose an approach that extends the (global) CAPM to incorporate non-tradable assets (see Alexander et al. 1987 ) and foreign ownership restrictions (see Eun and Janakiramanan 1986 ). Other models that capture relevant aspects of partially segmented capital markets consistent with the CAPM, such as Black ( 1974 ), Stulz ( 1981b ), Errunza and Losq ( 1985 ), Merton ( 1987 ), and Bekaert and Harvey ( 1995 ), are not presented in the textbooks we reviewed.

Comparing the 12 models to calculate the international cost of capital that are brought forward in Harvey ( 2005 ) to the models presented in the textbooks, Table 2 shows a clear preference for Model 1 (global CAPM) for valuation in developed countries with sufficiently integrated capital markets; this confirms the recommendation in Harvey ( 2005 ). The remaining 11 models, most of which are not consistent with the CAPM, are not found in the textbook literature. Footnote 15 For valuations in emerging markets, the degree of segmentation plays a major role when choosing an adequate model to estimate the cost of equity. In this respect, Harvey ( 2005 ) stresses that a term structure of country risk should be considered in long-term project evaluation, as segmentation may fade out. Summing up, for the assumption of partially segmented capital markets, no conclusive recommendation for a specific cost-of-equity model can be extracted from our limited review.

4 The contributions in this special issue

The literature review of textbooks in international financial management sheds some light on where we stand today and what knowledge is thought to be of use to future professionals and academics. It shows that theoretical and empirical research has found its way to the applied side of international finance. We can now put forward further interesting advances in international financial management included in this special issue of the Journal of Business Economics .

Schüler ( 2021 ) develops a comprehensive framework for cross-border discounted cash-flow valuation that is not found in the literature. The valuation framework encompasses the derivation of the risk-adjusted rate of return in order to discount future expected cash flow in accordance with the global CAPM while considering relevant risks such as exchange rate risk, business risk, financial risk, the risk related to tax shields, and the risk of default. The paper shows how the foreign currency and home currency approaches are equivalent when assuming uncertainty and risk aversion. This is demonstrated using the adjusted present value (APV) approach. The risk-adjusted discount rates to be used in the corresponding flow-to-equity (FTE) approach and in the weighted average cost of capital (WACC) approach are also presented. This paper is therefore relevant to the valuation of not only a foreign company, but also of a domestic company that generates cash flows in a foreign currency and/or uses debt-financing instruments denominated in a foreign currency.

In the article by Bartram et al. ( 2021 ), the literature on cross-sectional stock-return predictability, with over 450 factors documented for different asset classes, is reviewed. Taking the perspective of an institutional investor, the authors guide the reader through this “zoo of factors”, as they call it, discussing the evidence of factors and their relevance for an institutional investor. Their approach requires a theoretical rationale in order to identify the relevant “true” factors and differentiate them from factors resulting from data mining. According to their review, the performance of many factors depends on the inclusion of small- and micro-cap stocks. However, such securities are usually not relevant from an institutional investor’s perspective, as an investment in these collides with liquidity requirements and involves higher transaction costs. Most factors have been detected in the U.S. equity markets and then reproduced in international markets. In particular, style factors such as value and momentum, but also other predictors appear in several international markets facilitating global factor-based investment strategies. The article presents a set of factors in equities and other asset classes, including currencies, fixed income and commodities, that the authors see as meaningful “ingredients” of factor-based portfolio construction. They also bring forward some key metrics, like the maximum Sharpe ratio and others, that may help to identify the better model. Nonetheless they advert that the choice of test and comparison techniques may drive the results and point out that discerning between risk, mispricing and statistical bias remains a challenge for researchers and investors.

Hammer et al. ( 2021 ), use a dataset of 1149 global private equity transactions to analyze cross-border buyouts. They find that significantly higher valuation multiples are observed for these transactions than for domestic ones. They attribute their finding to informational asymmetries with which foreign acquirers are confronted. They show how the valuation spread encountered there diminishes under circumstances where the information asymmetries decrease (e.g. accounting standards, public listing, local partnering, size of the acquirer and its organizational resources).

While Hammer , Janssen , and Schwetzler analyze the valuation effect of information asymmetries in private equity transactions, the study by Bobenhausen and Salzmann ( 2021 ) examines informational asymmetries and their valuation impact in public equity offerings. Bobenhausen and Salzmann expand previous studies on equity rights offerings and the effects occurring when they are announced. The focus lies on the relationship between the discount of an equity rights offering and the announcement effect. They show that the relationship between a discount that signals the quality of the equity offering and the announcement effect found in previous studies is especially relevant in environments with a particularly low level of capital market transparency, i.e. high informational asymmetry. Their study estimates announcement effects across several countries while considering different transparency environments for equity rights offerings.

5 Conclusion

Certainly, international financial management and valuation is a special discipline in the broader field of finance. According to our analysis of the annual meetings of the European Finance Association, such topics are of persistent relevance, especially with respect to issues of foreign exchange management and asset pricing.

Our limited review of the textbook literature on international financial management has shown that international parity conditions, in particular the uncovered interest rate parity, the unbiasedness forward-rate hypothesis and the efficient markets version of the relative purchasing power parity continue to be the prevalent paradigms since the breakdown of the Bretton Woods system 50 years ago. An enormous amount of empirical research has shown that no exchange rate forecasting method is infallible and that some empirical anomalies still challenge economic theory, at least for some forecasting horizons, exchange rates and periods. However, empirical research also indicates that no pervasive trading strategies to “beat the market” can be devised after considering transaction costs and risk. The assumption of sufficient market integration appears to be the prevalent assumption in most textbooks on international financial management. Cross-border valuation of businesses or projects in less developed countries, where a high degree of segmentation must be considered, remains both a theoretical and practical challenge.

In a similar way, the topics presented in this special issue on international financial management show clearly that this is an area of ongoing research with high demand for practical applications. Schüler presents a comprehensive model for cross-border valuation, while Bartram , Lohre , Poe , and Ranganathan deliver a tour de force through the empirical research on relevant investment factors for different asset classes across the globe from the perspective of an institutional investor. Hammer , Janssen , and Schwetzler as well as Bobenhausen and Salzmann show how information asymmetries in cross-border situations influence the value of the investment target in private transactions or in public offerings. All these contributions give valuable theoretical and empirical insights for investment and financing decisions that management or investors need to consider in an international context. It shows that fruitful developments relating to academic research and its practical application are and will remain a key feature of this field of financial economics.

Data retrieved from the United Nations website, see United Nations ( 2021 ), on January 29, 2021 (access date).

We focused the literature review on publications in English, and did not include general textbooks on corporate finance or financial management. Please note that many such textbooks contain one or more chapters on international financial management issues; see for example standard textbooks such as Berk and DeMarzo ( 2020 , pp. 1097–1112), Brealey et al. ( 2020 , pp. 717–736), Brigham and Daves ( 2010 , pp. 1016–105), Copeland et al. ( 2014 , pp. 785–830), Moles et al. ( 2011 , pp. 837–886) and Ross et al. ( 2020 , pp. 935–957). Valuation handbooks and textbooks such as Koller et al. ( 2020 ) or Holthausen and Zmijewski ( 2020 ), and textbooks on global investments such as Solnik and McLeavey ( 2014 ) were likewise not included. These books basically reflect the same methodological approach as the textbooks presented in our review that specialize in international financial management. Therefore, not including such handbooks and textbooks has no material effect on our conclusions.

We apologize if valuable textbooks and handbooks we are not aware of have not been included in our literature review on international financial management.

According to the home currency approach, the market value of future payoffs in foreign currencies has to be converted into the home currency with the respective expected future exchange rate. This future payoff, now denominated in the home currency, is then discounted using the cost of capital of the home currency to obtain a market value expressed in the home currency. Instead, the foreign currency approach discounts future payoffs in foreign currencies with the foreign currency’s cost of capital. The resulting net present value is then converted to the home currency using the spot rate. Both approaches are deemed to be equivalent under certain conditions.

Please note that in the textbooks under review the term for “forward rate expectations parity” varies significantly from textbook to textbook, where it is also called “unbiasedness hypothesis”, “forward parity”, “forward rate unbiasedness” or “forward unbiasedness hypothesis”, etc. The uncovered interest rate parity (UIP) is sometimes also called “Fisher open”.

For example, Zenoff and Zwick ( 1969 ), a textbook written during the Bretton Woods regime of fixed exchange rates, reduces the exchange rate forecasting problem to the forecasting of inflation as a primary cause of currency devaluations and the imposition of exchange controls. The textbook by Weston and Sorge ( 1972 ), which was written shortly after the breakdown of the Bretton Woods system, likewise does not discuss international parity conditions and their possible applicability to forecasting.

The textbook Rodriguez and Carter ( 1984 ), the third edition of which was written in the mid-1980s, already had a clear focus on exchange rate determination and forecasting and used the concept of efficient markets and prediction based on forward exchange rates, see pp. 114–146; see also Abdullah ( 1987 ), pp. 54–55. The textbook by Evans ( 1992 ) presents also the efficient markets version of the relative purchasing power parity connecting both theories, see Roll ( 1979 ), Shapiro ( 1983 ) and, Adler and Lehmann ( 1983 ).

Levich ( 1979b ), pp. 258–259, presents an early account of studies on the forecasting accuracy of the forward rate conducted after the breakdown of the Bretton Wood system; see also Levich ( 1978 , 1979a , 1980 , 1983 , 1984 ).

The textbooks reviewed usually do not recommend technical analysis and fundamental analysis for practical applications. Technical analysis is deemed to be suitable, if at all, for short forecast horizons, see Eiteman et al. ( 2021 ), p. 285. Most textbooks state that technical analysis is only able to indicate the direction of exchange rate changes and is therefore not suitable for period-specific forecasting.

See for example Drukarczyk and Schüler ( 2016 , pp. 171), Holthausen and Zmijewski ( 2020 , p. 16), and Koller et al. ( 2020 , p. 178). For highly leveraged firms, see Arzac ( 1996 ), and for valuations with changing predetermined debt levels (probably the most common case in practice), see for example also Arzac ( 2008 , pp. 96–102).

In contrast, Kim and Kim ( 2006 ) show no distinguishable preference among the CAPM, a dividend growth rate model and a price-to-earnings ratio model.

The term “global CAPM” is not used uniformly in the textbooks we reviewed; sometimes it is called “world CAPM” or even “international CAPM”. Since the global CAPM assumes integrated capital markets, and not all capital markets in the world are integrated, we prefer the adjective “global” to “world”. We reserve the term “international CAPM” for versions that consider exchange risk as an additional factor, while the global CAPM is a single-factor model.

Sercu ( 2009 ) presents a detailed derivation of the model and its conceptual implications; see also O’Brien ( 2017b ) who provides an extensive demonstration of its application.

Jacque ( 2020 ) presents the approach of Damodaran ( 2003 ) without discussing the lack of conceptual consistency of this risk factor with the global CAPM, see for example Kruschwitz et al. ( 2012 ).

The only exception is Model 7 that corresponds to the (ad hoc) country-risk model of Damodaran ( 2003 ).

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Link between Financial Management Behaviours and Quality of Relationship and Overall Life Satisfaction among Married and Cohabiting Couples: Insights from Application of Artificial Neural Networks

Monika baryła-matejczuk.

1 Institute of Psychology and Human Sciences, University of Economics and Innovation, 20-209 Lublin, Poland; [email protected]

Viktorija Skvarciany

2 Faculty of Business Management, Vilnius Gediminas Technical University, LT-10223 Vilnius, Lithuania; [email protected]

Andrzej Cwynar

3 Institute of Public Administration, Business and Management, University of Economics and Innovation, 20-209 Lublin, Poland; [email protected] (A.C.); [email protected] (W.C.)

Wiesław Poleszak

Wiktor cwynar.

Background: To explain the link between household finances and the quality of the relationship between married or cohabitating partners and their life satisfaction, the Family Stress Model (FSM) was used and placed within the theoretical framework of the Couples and Finances Theory (CFT). Methods: The measures used to examine the relationship between partners were the Financial Management Behaviour Scale, the Marriage Questionnaire (KDM-2) adapted to a version for cohabitating couples, The Shared Goals and Values Scale, Harsh Start-up Scale, and the Satisfaction With Life Scale (SWLS). In order to find out the relationship between variables, artificial neural networks (ANN) were applied. The research was conducted on a sample of 500 couples living in Poland (384 married and 116 cohabitating couples). Results: The results indicate that overall life satisfaction is most influenced by fundamental, direct, current ways of dealing with the daily financial routine and by saving and investing behaviours. Credit management and insurance behaviours are the most important for the quality of the relationship between partners. Conclusions: The research shows that financial management behaviours have an impact on the quality of relationships as well as on the subjective well-being of people in a relationship, and their relationship dynamics. This finding may be used to highlight the psychological importance of financial management behaviours.

1. Introduction

Various aspects of intra-household financial life have become the subject of many discussions, estimates, and analyses for many researchers and practitioners around the world who are concerned with both financial and relationship issues. They indicate the need to analyse the relationship between variables related to these following two domains: financial and relationship [ 1 ]. Overall, the conclusion is that it is essential to attain an improved understanding of the significance and role of financial management in the quality and durability of the relationships of married and cohabiting couples (e.g., [ 1 , 2 , 3 , 4 , 5 , 6 ]).

An attempt to explain this link is undertaken by applying the Couples and Finances Theory (CFT) model developed by Archuleta [ 7 ]. The primary assumption of the CFT theory is that financial difficulties are related to problems in the relationship ([ 8 ] as cited in [ 9 ]). The CFT is based on ecological theory, a systemic approach to investigating relationships with the financial process in the centre (every component that cooperates in bi-directional relationships). In theory, the pair system consists of a husband and wife (H&W), their marital quality (MQ), and relationship characteristics (CRC), and the financial process comprising financial inputs (FI) and financial management practices (FMP). In this article, the CFT approach is used to help to clarify the connections between the relationship of the couple and the household financial processes [ 7 ]. Additionally, in this study, the analysis was extended to include overall life satisfaction.

Another of the proposed approaches used to explain the link between intra-household finances and the quality of a relationship is the family stress model of economic pressure and marital distress, or simply the family stress model [ 10 , 11 ]. According to this model, negative economic events lead to economic pressure, resulting in changes to the affective states and, finally, to a decline in marital quality. This theory was supported by studies conducted in the USA in the 1980s, which indicated that negative economic events were associated with an increased sense of economic pressure, which in turn, was linked to affective changes (including increased depression and hostility that increased marital distress). Furthermore, some studies have produced evidence that support through affection as well as conflict management skills, helped (indirectly) to reduce the effects of economic pressure, and increased the odds of marital quality improvement [ 10 ] ([ 12 ] as cited in [ 1 ]).

2. Literature Review

Studies led by Kerkmann, Lee, Lown, and Allgood [ 13 ] indicate that financial issues affect marital satisfaction. The authors showed that financial factors might explain 15% of marital satisfaction. However, they point out that these results should be treated with caution, as the sample consisted of young couples with a short marital relationship [ 13 ].

Other studies have drawn attention to the role played by financial arrangements, especially arguments concerning money, on marital quality. Research has shown that financial issues are an essential cause of conflict between spouses. The results obtained by Britt and Huston [ 14 ] suggest that arguments concerning money are an essential indicator of relationship satisfaction, but they do not have such a significant impact on the likelihood of divorce. However, poor financial management may harm the quality of a relationship. The consequences of bad financial management such as excessive consumer debt are related to both marital conflicts and the likelihood of divorce [ 15 ]. The results of a study by Dew and Xiao [ 11 ] suggest that financial declines are not directly related to proper financial management.

On the other hand, correct financial management is positively associated with happiness in marriages and cohabitation relationships. Furthermore, proper financial management has a direct influence on the relationship between economic pressure and relationship happiness. It also influences the relationship between financial decline and the happiness of a couple [ 11 ].

Britt, Grable, Nelson-Goff, and White [ 3 ] evaluated how the perceived own money-spending behaviours, the conduct of a partner, and the joint financial behaviour of the couple affect the degree of satisfaction experienced within relationships. The results indicated that the behaviour of the partner related to expenditures affected the degree of satisfaction derived from the relationship and the decision to stay within the relationship. Interestingly, the perceived own behaviours or common spending behaviours were not a significant factor in the quality of the relationship. Self-esteem and financial stressors were also important factors for the degree of satisfaction experienced within the relationship [ 3 ]. Archuleta, Britt, Tonn, and Grable [ 2 ] investigated the link between financial satisfaction and financial stressors and the decision of the spouse to remain married or to leave their partner. The role of demographic variables, socio-economic variables, religiosity, psychological constructs, financial satisfaction, and financial stressors as factors relevant to marital satisfaction were analysed. Religiousness and financial satisfaction were positively correlated with marital satisfaction. There was also a negative relationship between financial satisfaction and financial stressors. When the spouses experienced more financial stressors, they were also more likely to leave the marriage. The authors concluded that financially satisfied spouses were also more content with their marriages, or less willing to leave them [ 2 ].

The studies discussed above indicate the role of bad financial management as an essential stressor in relationships. Behaviours that help individuals and families to attain a more stable financial position are associated to a significant extent with a sense of satisfaction derived from the relationship [ 1 , 2 , 11 , 16 ]. Financial problems affect the ability of a couple to communicate and resolve conflicts and thus remain in a relationship. Both communication and financial resources are essential factors in understanding the causes of arguments between partners [ 17 ]. Compared to other types of marital misunderstandings, conflicts related to finances are more problematic for couples and are one of the best predictors of negative conflict tactics [ 18 ]. Contemporary research [ 19 ] provides an empirical basis for the development of a theoretical framework for understanding patterns of marital interactions and the impact of these patterns on marital satisfaction. The way in which couples communicate concerning financial matters is essential. Research shows that even though it is commonly believed that money is not the most frequently discussed problem within marriages, arguments concerning money are generally the most intense disagreements within married couples [ 19 ]. When couples engage in negative interactions, conflict resolution becomes more and more difficult, and marital satisfaction decreases.

However, when the partners share a sense of meaning within the relationship, their marital satisfaction increases. Couples who engage in discussions using criticism or sarcasm (i.e., forms of contempt for partners) tend to face disagreement/arguments more often. In other words, when one of the partners enters a discussion by blaming the other or criticizing, they get involved in sharp or harsh start-ups [ 20 ]. Archuleta [ 7 ] and Archuleta et al. [ 1 ] adopted the concept of shared goals and values from the work of Gottman [ 20 ]. Archuleta and colleagues reported that those who were more satisfied financially engaged less in harsh start-ups and had more shared goals and values. Additionally, positive discussion and shared goals and values were positively associated with relationship satisfaction [ 1 ]. Rosenblatt and Keller [ 21 ] found that couples who experienced more significant economic distress reported a greater degree of blaming behaviour within the marriage. The authors conclude that the economic problems of farm couples with greater economic vulnerability produce stress in these relationships.

There is evidence to suggest that healthy financial management is associated not only with marital satisfaction, but also with general life satisfaction (cf. [ 22 ]). It has been well documented that expressing healthy financial behaviours is positively related to overall life satisfaction [ 23 ] and emotional well-being [ 24 ]. Overall life satisfaction is often linked to the availability of financial resources [ 25 , 26 ]. On one hand, lower wages, inadequate financial management, inferior financial situation, and the general conditions associated with poverty mean that people do not have sufficient funds to pay for investments that would bring them a greater sense of satisfaction. This leads to a lower level of general life satisfaction. People who live in poverty are the most vulnerable to a sense of dissatisfaction with life. Research concerning the determinants of life satisfaction in a poor community [ 26 ] shows that for the achievement of satisfaction from life, the relevant factors include income level, employment status, or poverty status. Other studies, however, have shown that a growing income, resulting in higher purchasing power, optimism, and satisfaction, may not lead to positive changes in general life satisfaction (subjective well-being) [ 22 ].

Additionally, it has been found that excessive debt, which may arise as a result of unhealthy behaviours, is negatively linked to overall life satisfaction [ 27 , 28 ] and positively related to anxiety [ 1 ]. Tay et al. [ 29 ] indicated two channels through which debt may affect overall well-being. In the bottom-up spillover view, financial management (including credit management) may have considerable spillover effects in other life domains (e.g., the marriage-related indicators). On the other hand, from the resource perspective, debt imposes constraints on financial resources and, therefore, reduces the available stress buffer. According to the above-cited research, it seems that money is not the most discussed problem within marriages. However, given the intensity of arguments about money within marriages, we assumed that financial management behaviours are related to harsh start-ups, and to beliefs about shared goals and values (the meaning of money and how it should be used, the function of autonomy and independence, and with the hopes and aspirations for the family and future relationship goals).

The research conducted so far also indicates the role of unhealthy financial management behaviours as a significant stressor in the relationship, which is associated with perceived satisfaction within relationships. Additionally, spouses experiencing more financial stressors were also more likely to leave the marriage, and the consequences of unhealthy management are associated with both marital conflict and the likelihood of divorce. Therefore, it may be concluded that behaviours related to financial management are also directly related to the quality of the relationships built.

Finally, it has been well documented that expressing healthy financial behaviours is positively related to overall life satisfaction. The debt-related financial management dimension is of particular importance. It has been established that this is an aspect of financial life that is crucial for stress and its consequences, which may be experienced in the form of mental health problems, a lower quality of social functioning, and lower global cognitive judgments of life satisfaction.

3. Materials and Methods

3.1. financial management behaviour.

In order to examine financial management behaviour, we adopted the financial management behaviour scale (FBMS) introduced by [ 30 ]. This is the only multi-dimensional, psychometrically validated scale that has been validated in a nationally representative sample designed to date [ 30 ]. Multi-dimensionality means that the scale—as opposed to other scales present in the relevant literature—captures (as subscales) all possible domains of household financial matters: cash management, credit management, savings and investment, and insurance. The scale of [ 30 ] is based on a consensus regarding what should be deemed as healthy financial management behaviour, which is present in the household finance literature. For instance, timely repayment of credit card debt is considered to be healthy, while not saving for retirement is unhealthy. In fact, healthy financial management behaviour follows the rules of common sense. In order to obtain data concerning financial management behaviour, the respondents were required to answer the following question: ‘On a scale from 1 (never) to 5 (always) indicate how often you have engaged in the following activities in the past six months’ (see [ 30 ] for the exact wording of the items comprising the FMBS). As a result, each subscale and the aggregate FMBS can easily be interpreted: the higher the value on the scale, the more healthy the financial behaviour.

3.2. Shared Goals and Values

The Shared Goals and Values Scale [ 7 ] is a four-item measurement adapted by Archuleta derived from Gottman’s [ 31 ] Shared Meaning Roles, Shared Meaning Goals, and Shared Meaning Symbols scales that are used to assess the shared meaning of couples concerning financial goals and values, life goals, and autonomy. The responses were measured using a 7-point Likert-type scale, where 1 = strongly disagree, and 7 = strongly agree. Response scores could range from 4 to 28, with lower scores indicating a lower degree of agreement concerning life goals and values, and higher scores reflecting more agreement on these issues.

3.3. Harsh Start-Up

Harsh start-ups were measured using a scale consisting of five items. The scale was adapted from work originally published by Gottman [ 31 ] and translated into Polish. Conceptually, a harsh start-up may be viewed as the way in which couples interact; more specifically, how couples engage in the discussion process covering conflictual topics. Each of the following items was assessed dichotomously, with a true statement being assigned a score of 1 or 0. Items were reverse coded and summed into a harsh start-up index scale score so that higher scores reflected being less likely to engage in the harsh start-up.

3.4. Relationship Quality

The Well-Matched Marriage/KDM-2 questionnaire in [ 32 ] was used to measure the quality of the relationship from the perspective of four dimensions: intimacy, disappointment, self-realisation, and similarity as well as the overall result indicating overall satisfaction with the marriage/relationship. The tool has satisfactory psychometric indicators concerning research on the population of Polish marriages and couples. Cronbach’s alpha for individual sub-scales ranges from 0.81–0.89. It is the only psychometrically validated scale that has been validated in a nationally representative sample scale that has been designed in Poland to date. The KDM-2 questionnaire applies to both spouses individually and to marriages. In this research, the questionnaire was adopted to also examine cohabitation relationships and consists of 32 statements. The respondent, while answering the questions, is asked to choose one of five answers on a scale from 1 = totally disagree to 5 = totally agree.

3.5. Overall Life Satisfaction

In order to assess overall life satisfaction, the SWLS scale was used [ 33 ]. The scale contains five statements. Respondents assess to what extent each of them relates to their lives. The result of the measurement is a general indicator of a sense of life satisfaction, specifically global cognitive judgments of satisfaction with one’s life [ 34 ]. The SWLS asked the respondents to rate on a 5-point Likert-type scale (where 1 states for “strongly disagree” and 5 for “strongly agree”), the extent to which they agree with the five statements, for example, “In most ways, my life is close to my ideal”; “The conditions of my life are excellent”; and “If I would live my life over, I would change almost nothing”. Some researchers have shown [ 35 ] that self-satisfaction is an important component of life satisfaction and equates to well-being with high self-esteem. The Polish translation of SWLS has been used and has shown to have strong internal reliability.

3.6. Study Design and Sampling

The research was conducted on a sample of 500 couples living in Poland: 768 spouses and 232 cohabitants. The sample selection procedure was commissioned via a professional market and opinion research agency, DRB Research in Poland. The sample was selected using a stratified sampling technique. Specifically, the respondents were selected from different voivodeships in proportion to the number of cohabitants and marriages living therein, with control for age and education. In order to find out the relationship between financial management behaviour indicators and indicators of both marital quality and satisfaction with overall well-being, artificial neural networks (ANN) were applied. Scholars from different science fields adapted ANNs as the tool for various areas of science including social sciences. Artificial neural networks are a powerful modelling technique for indicating the relationships between variables [ 36 ].

The method of using artificial neural networks (ANNs) is based on simulating the function of the nervous system of the human brain [ 37 , 38 ]. The neurons summarise the impulses sent by independent variables by weight and then transfers the integral impulse to define a dependent variable [ 39 ]. In other words, ANN is a technique based on artificial intelligence and has advantages against more traditional approaches such as regression [ 40 , 41 ]. The first benefit is that ANNs can detect both linear and nonlinear relationships; the second, the estimation accuracy of ANNs do not depend on assumptions about the distribution of the variables [ 40 ]. These ANN characteristics are crucial for selecting this approach in determining relationships. The variables used in the study are presented in Table 1 .

Variables used in the study (designed by the authors).

The respondents had to evaluate a different number of statements in order to assess the study variables. To evaluate the statements (except harsh start-up), a 7-point Likert scale was used. In fact, the Likert scale is one of the most frequently used scales for gathering data in the social sciences [ 42 , 43 ]. The research model is presented in Figure 1 .

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Analytical model (developed by the authors).

The analytical model ( Figure 1 ) seeks to investigate the relationships between financial management behaviour as represented by four variables (cash management, savings and investments, credit management, and insurance) and relationship quality, overall life satisfaction, harsh start-ups, and shared goals and values. Hence, four different models were used.

In order to test the analytical model, neural networks for four distinguished models were developed ( Figure 2 ). The number of cases used for training varied from 231 to 245, while for testing, it was from 95 to 108 (i.e., it is approximately 70/30 division in all the models, Table A1 ). The number of excluded cases was 661, which means that only fully-completed cases were used for the research. As a result, artificial neural networks were developed using 340 valid cases. In Figure 2 , the neural networks for the FMB group variables are presented.

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Neural network diagrams for: ( a ) Model A; ( b ) Model B; ( c ) Model C; ( d ) Model D (designed by the authors).

As can be seen in Figure 1 , all models have three layers. The input layer is represented by the factors, namely cash management, savings and investments, credit management, and insurance and one output layer represents relationship quality in Model A, overall life satisfaction in Model B, harsh start-up in Model C, and shared goals and values in Model D. Moreover, all models include one hidden layer. It is worth mentioning that the grey lines show a positive relationship, while the blue shows negative relationships. Moreover, the thickness of the line shows the strength of the connection. The parameters of the weights for Model A are provided in Table 2 .

Parameter estimates for Model A (calculated by the authors).

All of the synaptic weights presented in Table 2 are moderate. The negative weights varied from −0.345 to −0.078, while the positive ones varied from 0.111 to 0.229, which confirms that CashMan , SavInv , CreditMan , and Ins are the variables that affect the output variable RQ . In order to find out which of the independent variables were the most influential when determining the value of an output variable, the importance of the variables was calculated. The results are presented in Table 3 .

Independent variable importance for Model A (calculated by the authors).

The importance values show that the most critical value is credit management, the second is insurance, the third is savings and investment, and the fourth is cash management. Credit management, which relates to the actions taken by households to deal with borrowed funds, is of particular importance here. Insurance-related financial behaviour is in second place in terms of affecting the quality of the relationship.

In third place, in terms of importance, we have savings and investment. Healthy financial behaviour in this dimension is also essential for assessing satisfaction within the relationship. Finally, in terms of importance for the RQs are behaviours associated with cash management. Money management, in this case, means that the couple keeps a financial record (mental or written), maintains the discipline to stay within their budgets when spending, and also engage in comparison shopping. However, the importance of the CashMan variable is quite low; hence, it may be stated that it does not have a strong connection with relationship quality. In Table 4 , the parameters of Model B are provided.

Parameter estimates for Model B (calculated by the authors).

Table 4 shows that the negative weights varied from −0.824 to −0.250, while the positive ones varied from 0.203 to 0.495. In this case, all of the relationships can be treated as moderate or strong, but despite this fact, it showed that CashMan , SavInv , CreditMan , and Ins are the variables that have connections with the dependent variable of overall life satisfaction. In order to find out which of the independent variables were the most influential when determining the value of an output variable, the importance of the variables was calculated. The results are presented in Table 5 .

Independent variable importance for Model B (calculated by the authors).

Table 5 shows that the most crucial variable that relates to couples’ overall life satisfaction is cash management (the importance was 0.424 and savings and investments was 0.248). The importance of insurance and credit management were less critical than cash management. While they were less critical, the behaviours associated with insurance and savings and investments are still significant in the assessment of overall life satisfaction. This would indicate a less critical role of behaviours related to the distant future, and the greater importance of everyday financial tasks related to household tasks.

Consequently, as in the case of relationship quality, the analysis of the relationship between financial management behaviours and overall life satisfaction also indicates a significant connection. It may be concluded that healthy financial behaviour is conducive to favourable global cognitive judgments of satisfaction with the life of a spouse. It may also be concluded that another area of life, overall well-being, is affected by how couples manage their finances.

The third model to test was Model C, in which the nature of the link between cash management, savings and investments, credit management, insurance variables, and the harsh start-up variable were tested. The parameters are denoted in Table 6 .

Parameter Estimates for Model C (calculated by the authors).

From the information presented in Table 6 , the most considerable weight was assigned to the savings and investment variable, which shows that the relationship with harsh start-up is quite strong. The importance of each of the analysed variables is summarized in Table 7 .

Independent variable importance for Model C (calculated by the authors).

It may be observed in Table 7 that savings and investments appeared to be the most crucial variable. Credit management and insurance were also essential, while cash management was not as vital as the previously mentioned variables. The results of the calculations indicate that unhealthy behaviour in the area of savings and investment, the lack of actions taken by households to deal with borrowed funds, and the lack of behaviour aimed at protecting a contingency affects engagement more in the harsh start-up.

The fourth model, Model D, was investigated in order to determine the relationship between FMB variables ( CashMan , SavInv , CreditMan , Ins ) and common goals and values ( ShareGVal ). The weights of the parameters are provided in Table 8 .

Parameter estimates for Model D (calculated by the authors).

It may be observed in Table 8 that almost all of the weights were quite strong, which means that the relationships were also strong. However, the strongest one was the credit management weight. In order to find out which of the independent variables were the most influential when determining the value of an output variable, the importance of the variables was calculated. The results are presented in Table 9 .

Independent variable importance for Model D (calculated by the authors).

Table 9 shows that the most crucial variable that relates to the shared goals and values of couples were actions taken by households to deal with borrowed funds. Insurance is in second place, while cash management and savings and investments may be treated as non-essential variables, as the importance score was very low. For the shared meaning of couples concerning financial goals and values, life goals, and autonomy, the most crucial variable was credit management. Healthy behaviour associated with this financial activity is related to everyday household tasks and it turns out to be relatively unimportant for the interactional dynamics of couples. In second place in terms of importance were the behaviours related to insurance. People engaged in maintaining or purchasing an adequate health insurance policy, property insurance, and life insurance are less likely to start a conflict (they engage less in harsh start-ups).

5. Discussion

In this article, we attempted to address the question concerning the association between and among the various financial management behaviours, the interactional dynamics of couples, their relationship satisfaction, and overall life satisfaction. The investigation of the relationship between these variables is vital from the practical perspective of developing the acquired knowledge as well as filling the gap in the literature concerning the dimensions of healthy financial management behaviour as a factor that can protect the quality of relationships and overall quality of life. Due to the growing interest in research into the area of links between financial behaviour, the stress of couples, the dynamics of their relationships, and marital/relationship satisfaction, an attempt was made to capture the relationship between three critical areas of human functioning: psychological, financial, and social. The purpose of the analysis was to broaden the knowledge of employees of marriage counselling centres, marriage and family therapists, financial management specialists, and point out that finances do not just concern money, thus highlighting the crucial role of education and teaching competencies essential for healthy financial management. Finally, it emphasises the importance of healthy financial management dimensions for the healthy functioning of relationships and overall quality of life.

In the research conducted, the direct relationship between FMB and the quality of the relationship was first analysed. The investigation carried out indicates that the ways in which couples manage their finances affect the quality of their relationships. In other words, healthy behaviours related to achieving financial and economic goals are essential to the quality of the relationships built. The results are consistent with the research conducted to date, which indicates that the quality of relationships is related to the efficiency of their financial management (cf. [ 1 , 2 , 11 , 16 ]). They also indirectly point to the approach adopted throughout the research that the financial area is the foundation of the ability to meet many needs. The results of the research conducted support the concept of the Couples and Finances Theory, which in a simplified form, states that financial difficulties are related to relationship-related problems [ 7 , 8 ]. Similar conclusions were reached by Kerkmann, Lee, Lown, and Allgood [ 13 ], indicating that financial issues affect marital satisfaction as well as Dew and Xiao [ 11 ], who demonstrated that healthy financial management is positively associated with happiness in marriages and cohabitation. Therefore, it may be concluded that financially fit people are also more stable in their marriages (cf. [ 2 ]).

Our research shows that credit management and insurance are of the most significant importance for the quality of relationships. The results obtained broaden the knowledge about aspects of financial life related to relationship satisfaction. Healthy credit management behaviour has a positive impact on the cognitive assessment of relationship quality. Therefore, it may be assumed that healthy behaviour in this area is perceived by partners as desirable and comforting (cf. [ 15 ]). Insurance, in turn, involves far-reaching goals and protecting an unfavourable contingency. Again, it may be referred to as providing a sense of security, which is one of the basic needs of an individual. People who care about having optional insurance (against serious illness, insurance of their assets, a life insurance policy) assess their relationships better. Psychologically, this can mean that we meet basic needs (like the sense of security) and other needs are based on our financial means. That is, the way of managing and satisfying one’s needs (individual and relationship needs) no longer literally depends on obtaining various goods and services, but also depends on acquiring them through the appropriate management of financial resources.

A significant result obtained in this study is the positive relationship between cash management and engaging in harsh start-up (which is one of the dimensions of relationship dynamics). The result indicates that people with healthy behaviour in this area (who compare products, pay bills on time, stick to their budget) are less likely to get involved in the harsh start-up. Since cash management concerns basic needs, satisfying them (as important ones) will always be associated with strong emotions. Intense emotions, combined with negative interaction dynamics or a lack of conflict resolution skills, can lead to a release of tension. Displaying confidence in one’s financial management competence can be a source of compensation for relationship difficulties. These are areas worth covering in subsequent studies. The relationship between financial management and individual communication skills as well as conflict resolution in pairs would require unique clarification, and it would also be interesting to include personality factors in future research.

The way in which financial management behaviour affects the interactional dynamics of couples was also analysed. It was assumed that the aspects of relationship in a heterosexual couple that are related to communication strategies and shared goals and values in these relationships would both be directly related to relationship quality. The research conducted so far indicates that financial resources and the way they are managed are essential components for understanding the causes of arguments in a relationship [ 17 ], which in turn are significant for the quality of relationships. Research shows that if a discussion in a relationship begins with a difficult start, it will inevitably end negatively. Statistics indicate that in 96 per cent of cases, the outcome of a conversation can be predicted based on the first three minutes of a 15-min interaction. A problematic start (harsh start-up) is associated with more misunderstandings and less satisfaction within the relationship [ 44 ]. Compared to other types of marital misunderstandings, financial disagreements are more problematic for couples and are one of the best predictors of conflict tactics [ 18 ]. Quarrels about money, compared to other subjects, are the most intense disagreements in marriages (cf. [ 19 ]). In turn, similar views on (a) the importance of money and how it should be used; (b) the functions of autonomy and independence; and (c) hopes and aspirations for the family, and the future goals of relationships are related to both the relationship quality and the manner of interaction within the relationship. They are also influenced by the nature of financial management [ 7 , 8 , 31 ]. It has been documented that the way in which couples start a discussion (e.g., blaming or criticising a spouse or partner, and engaging in sharp start-ups,)also indicates that the couple has relatively few common goals and values.

Money management and insurance are of the most significant importance for setting shared goals and values, but savings and investment and credit management are also crucial for the healthy functioning of the relationship. Healthy behaviour in the area of credit management, saving for long-term goals, putting money aside as a deferred payday, or putting it into a retirement account has a positive impact on avoiding quarrels. In turn, healthy cash management as well as insurance for the future has a positive impact on common goals and values. In other words, healthy financial management behaviours strengthen the common approach to financial matters and decrease the frequency of engagement in a harsh start-up.

The relationship between financial management behaviours and overall life satisfaction was subsequently analysed. In the context of well-being, the most influential are cash management and saving and investment behaviour. Once again, cash management plays a vital role in the quality of functioning, and efficient functioning in this dimension can be treated as a factor that protects life satisfaction. According to researchers in this area, there is a fundamental difference between concepts that measure experienced well-being and concepts that measure life evaluation [ 22 , 45 , 46 ]. Therefore, the question is, how important is financial management in how partners are satisfied with their lives as a whole. First, in light of our results, for that aspect of well-being, the most critical factor is dealing with cash. As with other aspects of relationship interactions, these fundamental behaviours are the most influential. All in all, the results of our research confirm that expressing healthy financial behaviour is positively related to overall life satisfaction [ 23 ] and emotional well-being [ 24 ].

6. Conclusions, Limitations, and Future Research

This research shows that financial management behaviour has an impact on the quality of relationships as well as on the subjective well-being of the people in the relationship.

Money management and savings and investment behaviour are the most important for the subjective quality of life. Overall life satisfaction is influenced by the most fundamental, direct, and current ways of dealing with the daily financial routine and also by regular saving and generally planning for the future (setting long-term goals including retirement).

Overall life satisfaction is dependent on those dimensions of financial management that are associated with the daily aspects of life. These dimensions have a close psychological connection with the daily satisfaction of basic needs.

Credit management is the most critical aspect of financial management for the quality of the relationship. This finding may highlight the psychological importance of the sense of security. Healthy credit management behaviour (e.g., regular debt repayment, or comparing loan offerings) has a positive impact on how couples view their relationship. In other words, far-reaching goals are discussed (or argued about) more often than everyday shopping tasks. Insurance behaviour is also essential for the satisfaction of the relationship. Behaviours associated with non-compulsory insurance are designed to protect against unexpected changes, so they contribute toward ensuring safety. A feature of this dimension of financial management is that the insurance we studied is not mandatory, so it involves considering the future and the decision must be taken to take care of the future, both one’s own and the family’s (e.g., life insurance). Therefore, it can be said that what protects the quality of marriage from a financial perspective is the consideration of the future.

While living in cohabitation or marriage, individual needs are considered along with those in the relational context. Spouses discuss them, making decisions or at least exchanging information about them. Theoretically speaking, the quality of relationships should be associated with having common goals and values. Research shows that when people share goals and values, it is easier to maintain a consensus in this dimension and hence enjoy higher-quality relationships. This would explain why caring about far-reaching goals (such as insurance) is essential. Setting goals for the future is related to the need for security. It assumes a certain surplus and the security resulting from it. Having these skills (cash management, taking care of the future) protects against descending into conflict, which is not directly related to proper money management.

In conclusion, a list of protective factors and risks may be selected. The skilful use of money, spending it sensibly in everyday routine area translates into satisfying basic needs, and as a consequence, translates into life satisfaction and thinking about shared goals and values, which are essential for the quality of relationships. Credit management skills have a similar significance for the assessment of relationship satisfaction, overshadowing the elementary need for security. Skills in financial management are essential for the dynamics of relationships; the ability to secure the future has a unique role.

As usual, this research also has some limitations. In studies conducted to date, financial satisfaction was included in the analysis of the relationship between financial matters and marital quality as another potentially important factor. In future studies, it would be worth describing the relationship using this variable. Another topic worth exploring is the comparison between partners in relationships, as perceived by own behaviour or joint financial behaviour. It may be assumed that people in a relationship may have different perceptions of their behaviour as well as financial situations.

Additionally, it is worth noting which psychological mechanisms underlie the combination of management skills with the quality of the relationships, for which specific aspects of the FMB relationship matter.

Further research into the system approach would require the consideration of the role of children in households. Studies show [ 47 ] that in the case of money management, younger adults without children more often had independent money management systems. This would indicate the need to take account of having children and their importance in managing money (e.g., children introduce new categories of financial obligations).

Developing the issues discussed in the article with a positive psychology approach would indicate the need to identify both personal and social resources conducive to efficient financial management. The results are part of an already developed strategy regarding the importance of private resources for developing the quality of life.

The last of the proposed directions for research development would be to check how the method of money management, or rather the dynamics of management changes are related to the dynamics of the quality of marriage and family life. Longitudinal research concerning this topic would raise the issue of unexplored content.

The results obtained may be used in education and psychoeducation. The conclusions provide direction for preventive strategies that may be taken to support the well-being of individualsand provide them with satisfaction in their social lives. The application of the results is possible from both a psychological and economic point of view. Paying attention to the role of finance in life, the need for a good knowledge of the partner, resources, features, goals, and values before starting a relationship can help to develop it in a more satisfying manner. Appropriately teaching children for their age and developmental stage concerning money management is a protective factor for their well-being in life.

In summary, one should highlight the importance of financial management in aspects related to relationships and quality of life. The level of awareness of this should be raised for specialists working to improve the quality of marital and cohabitant relations, and above all, the psychological understanding of money should be stressed as an element of satisfying needs. The results obtained should also be considered in the context of couples and families in crisis who are searching for explanations for their situation; deficiencies in management skills (or asymmetrical competences in this aspect of the relationship) as potential causes of difficulties within the relationship and life. This knowledge may be particularly useful for psychotherapists of couples and families.

Case processing summary (calculated by authors).

Author Contributions

Conceptualization, M.B.-M., W.P., A.C., and W.C.; Methodology, M.B.-M., W.P., V.S., A.C., and W.C.; Formal analysis, V.S.; Investigation, M.B.-M., W.P., and A.C.; Data curation, V.S., M.B.-M., and A.C.; Wariting—original draft preparation, M.B.-M., W.P., V.S., and A.C.; Writing—review and editing, M.B.-M., A.C., W.P., V.S., and W.C.; Visualisation, V.S.; Supervision, M.B.-M. and A.C.; Project administration, A.C. and W.C.; Funding acquisition, A.C. and W.C. All authors have read and agreed to the published version of the manuscript.

This research was funded by the Ministry of Science and Higher Education, Republic of Poland, grant number 0057/DLG/2016/10. The APC was funded by the University of Economics and Innovation, Lublin, Poland.

Conflicts of Interest

The authors declare no conflict of interest. The funders had no role in the design of the study; in the collection, analyses, or interpretation of data; in the writing of the manuscript, or in the decision to publish the results.

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  • The Role of Budgeting in Financial Planning
  • Strategic Financial Management in SMEs
  • The Impact of Working Capital Management on Profitability
  • Ethical Considerations in Financial Planning
  • Risk Management in Financial Planning
  • Cost Control Techniques in Manufacturing
  • Financial Decision-making Processes in Non-profit Organizations
  • The Impact of Inflation on Financial Planning
  • International Financial Planning Strategies
  • The Relationship between Corporate Governance and Financial Planning

Investment Analysis and Portfolio Management

  • The Efficient Market Hypothesis: A Critical Analysis
  • The Role of Behavioral Finance in Investment Decisions
  • Modern Portfolio Theory and Its Limitations
  • Risk and Return Analysis in Emerging Markets
  • Socially Responsible Investment Strategies
  • The Impact of Political Instability on Investment Decisions
  • Real Estate Investment Trusts (REITs): An In-depth Study
  • Impact of Technology on Portfolio Management
  • Mutual Funds vs. ETFs: A Comparative Study
  • The Role of Artificial Intelligence in Investment Management

Corporate Finance

  • Capital Structure Decisions in Startups
  • The Role of Dividends in Corporate Financial Management
  • Mergers and Acquisitions: Strategic Financial Analysis
  • Corporate Financing in Developing Economies
  • An Analysis of Venture Capital Financing
  • The Impact of Corporate Social Responsibility on Financial Performance
  • The Role of Financial Management in Business Turnaround Strategies
  • Debt Financing vs. Equity Financing: A Comparative Analysis
  • Corporate Financial Risk Management Strategies
  • Financing Innovation: Challenges and Opportunities

International Financial Management

  • Exchange Rate Dynamics and International Financial Decisions
  • The Role of International Financial Institutions in Economic Development
  • Cross-border Mergers and Acquisitions
  • Globalization and Its Impact on Financial Management
  • International Tax Planning Strategies
  • Challenges in Managing International Financial Risk
  • Currency Risk Management in Multinational Corporations
  • International Capital Budgeting Decisions
  • The Impact of Cultural Differences on International Financial Management
  • Foreign Direct Investment Strategies and Financial Management

Financial Markets and Institutions

  • The Role of Central Banks in Financial Stability
  • The Evolution of Microfinance Institutions
  • The Impact of Regulation on Banking Operations
  • An Analysis of Stock Market Efficiency
  • Financial Derivatives and Risk Management
  • The Role of Technology in Financial Services
  • A Study of Financial Crises and Regulatory Responses
  • Peer-to-Peer Lending Platforms: A New Paradigm
  • The Role of Credit Rating Agencies in Financial Markets
  • The Future of Cryptocurrency in the Financial Landscape

Personal Finance Management

  • Financial Literacy and Personal Investment Decisions
  • The Role of Technology in Personal Finance Management
  • Retirement Planning Strategies
  • Impact of Consumer Behavior on Personal Financial Decisions
  • Personal Finance Management in the Gig Economy
  • A Study of Personal Bankruptcy Trends
  • Credit Card Management Strategies for Individuals
  • The Effect of Education on Personal Financial Management
  • The Role of Financial Counseling in Personal Finance
  • Estate Planning: A Comprehensive Analysis

Risk Management

  • Enterprise Risk Management: A Strategic Approach
  • The Role of Insurance in Financial Risk Management
  • Financial Innovations in Risk Management
  • A Study of Credit Risk Management in Banks
  • Risk Management Strategies in Supply Chain Finance
  • Cyber Risk Management in Financial Institutions
  • The Impact of Climate Change on Financial Risks
  • A Study of Operational Risk Management in the Healthcare Sector
  • Behavioral Aspects of Risk Management
  • Crisis Management and Financial Stability

Financial Technology (FinTech)

  • The Rise of Blockchain Technology in Finance
  • The Impact of FinTech on Traditional Banking
  • Regulatory Challenges in the Age of FinTech
  • Financial Inclusion through FinTech Innovation
  • Artificial Intelligence in Financial Services
  • The Future of Cryptocurrencies: Opportunities and Risks
  • A Study of Peer-to-Peer Lending Platforms
  • FinTech and Consumer Privacy: Ethical Considerations
  • Mobile Banking: An Evolutionary Study
  • The Role of Big Data Analytics in Financial Decision Making

Ethics and Sustainability in Finance

  • Ethical Investing: Trends and Challenges
  • Corporate Social Responsibility Reporting in Finance
  • Sustainable Finance in Emerging Economies
  • Environmental, Social, and Governance (ESG) Criteria in Investment
  • The Impact of Business Ethics on Financial Performance
  • The Role of Sustainability in Corporate Financial Strategy
  • Green Bonds and Financing Sustainable Development
  • Social Impact Investing: Opportunities and Challenges
  • A Study of Gender Equality in Financial Institutions
  • Financial Strategies for Achieving Sustainable Development Goals

Accounting and Finance

  • Forensic Accounting: Techniques and Case Studies
  • The Role of Management Accounting in Financial Decision-making
  • International Financial Reporting Standards (IFRS) Adoption
  • The Impact of Taxation on Financial Management
  • Accounting Information Systems: An In-depth Analysis
  • The Role of Auditing in Corporate Governance
  • Accounting Ethics: A Study of Professional Conduct
  • Environmental Accounting and Sustainable Development
  • The Effect of Automation on Accounting Practices
  • A Comparative Study of GAAP and IFRS

The extensive list above offers a broad spectrum of financial management research paper topics. They cater to different academic levels and areas of interest, providing a wealth of opportunities for students to explore the multi-dimensional world of financial management. The selection of these topics can lead to exciting discoveries and insights, pushing the boundaries of existing knowledge in the field. Whether it’s understanding the intricate dynamics of global finance or delving into the ethical considerations in investment decisions, these topics serve as starting points for thought-provoking research that can shape future practices in financial management. By choosing a topic from this comprehensive list, students embark on a journey of intellectual exploration that can contribute to both academic success and the broader understanding of financial management in the modern world.

Financial Management and the Range of Research Paper Topics

Financial management is a multifaceted discipline that stands at the intersection of economics, business administration, and finance. It governs the planning, organizing, directing, and controlling of financial activities within an organization or individual framework. In an ever-changing global economy, the importance of financial management cannot be overstated. It empowers organizations and individuals to make informed decisions, manage risks, and achieve financial stability and growth. This article delves into the vast domain of financial management and explores the wide array of research paper topics it offers.

A. Definition and Core Concepts of Financial Management

Financial management refers to the efficient and effective management of money to achieve specific objectives. It involves processes and tasks such as budgeting, forecasting, investment analysis, risk management, and financial reporting. The primary goals are to maximize shareholder value, ensure liquidity, and maintain solvency.

  • Budgeting and Forecasting : These processes involve planning and estimating future financial needs and outcomes. They guide decision-making and help in aligning resources with organizational goals.
  • Investment Analysis : This includes evaluating investment opportunities and determining the most profitable and sustainable investments.
  • Risk Management : This aspect focuses on identifying, evaluating, and mitigating financial risks, including market risk, credit risk, and operational risk.
  • Financial Reporting : This entails the preparation and presentation of financial statements that accurately reflect the financial position of an organization.

B. Importance of Financial Management

  • Ensuring Financial Stability : Effective financial management helps in maintaining the financial health of an organization or individual by ensuring a balance between income and expenditure.
  • Optimizing Resources : It enables the optimal utilization of resources by aligning them with short-term and long-term goals.
  • Strategic Planning : Financial management plays a key role in strategic planning by providing insights into financial capabilities and constraints.
  • Enhancing Profitability : By making informed investment and operational decisions, financial management enhances the profitability of an organization.

C. Modern Trends and Challenges in Financial Management

The evolution of technology, globalization, regulatory changes, and societal expectations have shaped modern financial management. Some noteworthy trends and challenges include:

  • Financial Technology (FinTech) : The integration of technology into financial services has revolutionized banking, investing, and risk management.
  • Globalization : The interconnectedness of global markets presents both opportunities and challenges in managing international financial operations.
  • Sustainability and Ethics : The growing focus on environmental, social, and governance (ESG) criteria has led to ethical investing and sustainable finance.
  • Regulatory Compliance : Navigating the complex regulatory landscape is a challenge that requires constant adaptation and vigilance.

D. Range of Research Paper Topics in Financial Management

The vastness of financial management offers a rich source of research paper topics. From exploring the intricacies of investment analysis to understanding the ethical dimensions of finance, the possibilities are endless. The following are some broad categories:

  • Corporate Finance : Topics related to capital structure, mergers and acquisitions, dividend policies, and more.
  • Investment and Portfolio Management : Including research on investment strategies, portfolio optimization, risk and return analysis, etc.
  • International Financial Management : This encompasses studies on exchange rate dynamics, global financial strategies, cross-border investments, etc.
  • Risk Management : Topics include various risk management techniques, insurance, financial innovations in risk management, etc.
  • Personal Finance Management : This field covers financial planning for individuals, retirement strategies, credit management, etc.
  • Financial Technology : Blockchain, cryptocurrencies, mobile banking, and more fall under this innovative domain.
  • Ethics and Sustainability in Finance : Research in this area may focus on ethical investing, corporate social responsibility, green financing, etc.

Financial management is an expansive and dynamic field that intertwines various elements of finance, economics, and business administration. Its importance in today’s world is immense, given the complexities of the global financial system. The array of research paper topics that this subject offers is indicative of its diversity and depth.

From traditional concepts like budgeting and investment analysis to modern phenomena like FinTech and sustainability, the world of financial management continues to evolve. It invites scholars, practitioners, and students to explore, question, and contribute to its understanding.

The range of research paper topics in financial management offers avenues for academic inquiry and practical application. Whether it’s investigating the effects of globalization on financial strategies or exploring personal finance management in the gig economy, there’s a topic to spark curiosity and inspire research. These research endeavors not only enrich academic literature but also play a crucial role in shaping the future of financial management. In a rapidly changing world, continuous exploration and learning in this field are essential to remain relevant, innovative, and responsible.

How to Choose Financial Management Research Paper Topics

Choosing the right research paper topic in the field of financial management is a critical step in the research process. The chosen topic can shape the direction, depth, and impact of the research. Given the wide array of subfields within financial management, selecting a suitable topic can be both exciting and challenging. Here’s a comprehensive guide to assist you in choosing the ideal financial management research paper topic.

1. Understand Your Interest and Strengths

  • Assess Your Interests : Consider what aspects of financial management intrigue you the most. Your enthusiasm for a subject can greatly enhance the research process.
  • Identify Your Strengths : Understanding where your skills and knowledge lie can guide you towards a topic that you can explore competently.
  • Connect with Real-world Issues : Relating your interests to current industry challenges or trends can make your research more relevant and engaging.

2. Consider the Scope and Depth

  • Define the Scope : A clear understanding of the scope helps in keeping the research focused. Too broad a topic can make the research vague, while too narrow may limit your exploration.
  • Determine the Depth : Decide how deep you want to delve into the topic. Some subjects may require extensive quantitative analysis, while others may be more theoretical.

3. Examine Academic and Industry Relevance

  • Align with Academic Requirements : Ensure that the topic aligns with your course objectives and academic requirements.
  • Analyze Industry Needs : Consider how your research could contribute to the industry or address specific financial management challenges.

4. Evaluate Available Resources and Data

  • Assess Data Accessibility : Ensure that you can access the necessary data and information to conduct your research.
  • Consider Resource Limitations : Be mindful of the time, financial, and technological resources that you’ll need to complete your research.

5. Review Existing Literature

  • Analyze Previous Research : Review related literature to identify gaps, controversies, or emerging trends that you can explore.
  • Avoid Duplication : Ensure that your chosen topic is unique and not merely a repetition of existing studies.

6. Consult with Experts and Peers

  • Seek Guidance from Faculty : Consulting with faculty or mentors can provide valuable insights and direction.
  • Collaborate with Peers : Discussions with classmates or colleagues can help in refining ideas and getting diverse perspectives.

7. Consider Ethical Implications

  • Evaluate Ethical Considerations : Ensure that your research complies with ethical guidelines, especially if it involves human subjects or sensitive data.
  • Reflect on Social Impact : Consider how your research might influence society, policy, or industry standards.

8. Test the Feasibility

  • Conduct a Preliminary Study : A small-scale preliminary study or analysis can help in gauging the feasibility of the research.
  • Set Realistic Goals : Ensure that your research objectives are achievable within the constraints of time, resources, and expertise.

9. Align with Career Goals

  • Consider Future Applications : Think about how this research might align with your career goals or professional development.
  • Build on Past Experience : Leveraging your past experiences or projects can lend depth and continuity to your research.

10. Stay Flexible and Adaptable

  • Be Open to Change : Research is often an iterative process; being flexible allows for adaptation as new insights or challenges emerge.
  • Maintain a Balanced Perspective : While focusing on your chosen topic, keep an open mind to interrelated areas that might enrich your research.

Choosing the right financial management research paper topic is a nuanced process that requires careful consideration of various factors. From understanding personal interests and academic needs to evaluating resources, ethics, and feasibility, each aspect plays a significant role in shaping the research journey.

By following this comprehensive guide, students can navigate the complexities of selecting a suitable research paper topic in financial management. The ultimate goal is to find a topic that resonates with one’s interests, aligns with academic and professional objectives, and contributes meaningfully to the field of financial management. Whether delving into the dynamics of risk management or exploring the impact of FinTech innovations, the chosen topic should be a catalyst for inquiry, creativity, and growth.

How to Write a Financial Management Research Paper

Writing a research paper on financial management is a rigorous process that demands a thorough understanding of financial concepts, analytical skills, and adherence to academic standards. From selecting the right topic to presenting the final piece, each step must be methodically planned and executed. This section provides a comprehensive guide to help students craft an impactful financial management research paper.

1. Understand the Assignment

  • Read the Guidelines : Begin by understanding the specific requirements of the assignment, including formatting, length, deadlines, and the expected structure.
  • Clarify Doubts : If any aspect of the assignment is unclear, seek clarification from your instructor or mentor to avoid mistakes.

2. Choose a Strong Topic

  • Identify Your Interest : Select a topic that interests you, aligns with your strengths, and meets academic and industry relevance. Refer to the previous section for detailed guidelines on choosing a topic.

3. Conduct Extensive Research

  • Explore Varied Sources : Use academic journals, textbooks, online databases, and industry reports to gather diverse perspectives and evidence.
  • Evaluate the Credibility : Ensure that the sources are credible, relevant, and up-to-date.
  • Organize Your Findings : Maintain well-organized notes, including source citations, to facilitate smooth writing later.

4. Develop a Thesis Statement

  • Define Your Focus : Craft a clear and concise thesis statement that outlines the central argument or purpose of your research.
  • Align with the Evidence : Ensure that your thesis is well-supported by the evidence you have gathered.

5. Create an Outline

  • Structure Your Paper : Plan the structure of your paper, including the introduction, body, and conclusion.
  • Organize Ideas : Arrange your ideas, arguments, and evidence logically within the outline.

6. Write a Compelling Introduction

  • Introduce the Topic : Provide background information and context to the reader.
  • Present the Thesis : Clearly state your thesis to guide the reader through your research.
  • Engage the Reader : Use compelling language to create interest in your study.

7. Develop the Body of the Paper

  • Present Your Arguments : Use clear and concise paragraphs to present each main idea or argument.
  • Support with Evidence : Include relevant data, charts, graphs, or quotations to support your claims.
  • Use Subheadings : Subheadings can help in organizing the content and making it more reader-friendly.

8. Include Financial Analysis

  • Apply Financial Models : Use relevant financial models, theories, or frameworks that pertain to your topic.
  • Perform Quantitative Analysis : Utilize statistical tools, if necessary, to analyze financial data.
  • Interpret the Results : Ensure that you not only present the numbers but also interpret what they mean in the context of your research.

9. Write a Thoughtful Conclusion

  • Summarize Key Points : Recap the main arguments and findings of your paper.
  • Restate the Thesis : Reiterate your thesis in light of the evidence presented.
  • Provide Insights : Offer insights, implications, or recommendations based on your research.

10. Revise and Edit

  • Review for Clarity : Read through the paper to ensure that the ideas flow logically and the arguments are well-articulated.
  • Check for Errors : Look for grammatical, spelling, and formatting errors.
  • Seek Feedback : Consider getting feedback from peers, tutors, or mentors to enhance the quality of your paper.

11. Follow Formatting Guidelines

  • Adhere to Citation Style : Follow the required citation style (APA, MLA, etc.) consistently throughout the paper.
  • Include a Bibliography : List all the references used in the research in a properly formatted bibliography.
  • Add Appendices if Needed : Include any supplementary material like data sets or additional calculations in the appendices.

Writing a financial management research paper is a complex task that demands meticulous planning, diligent research, critical analysis, and clear communication. By adhering to these detailed guidelines, students can craft a research paper that not only meets academic standards but also contributes to the understanding of intricate financial management concepts.

Whether exploring investment strategies, corporate finance, or financial risk management, a well-crafted research paper showcases one’s analytical capabilities, comprehension of financial principles, and the ability to apply theoretical knowledge to real-world scenarios. It is an invaluable exercise in intellectual exploration and professional development within the realm of financial management.

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Research Topics & Ideas: Finance

120+ Finance Research Topic Ideas To Fast-Track Your Project

If you’re just starting out exploring potential research topics for your finance-related dissertation, thesis or research project, you’ve come to the right place. In this post, we’ll help kickstart your research topic ideation process by providing a hearty list of finance-centric research topics and ideas.

PS – This is just the start…

We know it’s exciting to run through a list of research topics, but please keep in mind that this list is just a starting point . To develop a suitable education-related research topic, you’ll need to identify a clear and convincing research gap , and a viable plan of action to fill that gap.

If this sounds foreign to you, check out our free research topic webinar that explores how to find and refine a high-quality research topic, from scratch. Alternatively, if you’d like hands-on help, consider our 1-on-1 coaching service .

Overview: Finance Research Topics

  • Corporate finance topics
  • Investment banking topics
  • Private equity & VC
  • Asset management
  • Hedge funds
  • Financial planning & advisory
  • Quantitative finance
  • Treasury management
  • Financial technology (FinTech)
  • Commercial banking
  • International finance

Research topic idea mega list

Corporate Finance

These research topic ideas explore a breadth of issues ranging from the examination of capital structure to the exploration of financial strategies in mergers and acquisitions.

  • Evaluating the impact of capital structure on firm performance across different industries
  • Assessing the effectiveness of financial management practices in emerging markets
  • A comparative analysis of the cost of capital and financial structure in multinational corporations across different regulatory environments
  • Examining how integrating sustainability and CSR initiatives affect a corporation’s financial performance and brand reputation
  • Analysing how rigorous financial analysis informs strategic decisions and contributes to corporate growth
  • Examining the relationship between corporate governance structures and financial performance
  • A comparative analysis of financing strategies among mergers and acquisitions
  • Evaluating the importance of financial transparency and its impact on investor relations and trust
  • Investigating the role of financial flexibility in strategic investment decisions during economic downturns
  • Investigating how different dividend policies affect shareholder value and the firm’s financial performance

Investment Banking

The list below presents a series of research topics exploring the multifaceted dimensions of investment banking, with a particular focus on its evolution following the 2008 financial crisis.

  • Analysing the evolution and impact of regulatory frameworks in investment banking post-2008 financial crisis
  • Investigating the challenges and opportunities associated with cross-border M&As facilitated by investment banks.
  • Evaluating the role of investment banks in facilitating mergers and acquisitions in emerging markets
  • Analysing the transformation brought about by digital technologies in the delivery of investment banking services and its effects on efficiency and client satisfaction.
  • Evaluating the role of investment banks in promoting sustainable finance and the integration of Environmental, Social, and Governance (ESG) criteria in investment decisions.
  • Assessing the impact of technology on the efficiency and effectiveness of investment banking services
  • Examining the effectiveness of investment banks in pricing and marketing IPOs, and the subsequent performance of these IPOs in the stock market.
  • A comparative analysis of different risk management strategies employed by investment banks
  • Examining the relationship between investment banking fees and corporate performance
  • A comparative analysis of competitive strategies employed by leading investment banks and their impact on market share and profitability

Private Equity & Venture Capital (VC)

These research topic ideas are centred on venture capital and private equity investments, with a focus on their impact on technological startups, emerging technologies, and broader economic ecosystems.

  • Investigating the determinants of successful venture capital investments in tech startups
  • Analysing the trends and outcomes of venture capital funding in emerging technologies such as artificial intelligence, blockchain, or clean energy
  • Assessing the performance and return on investment of different exit strategies employed by venture capital firms
  • Assessing the impact of private equity investments on the financial performance of SMEs
  • Analysing the role of venture capital in fostering innovation and entrepreneurship
  • Evaluating the exit strategies of private equity firms: A comparative analysis
  • Exploring the ethical considerations in private equity and venture capital financing
  • Investigating how private equity ownership influences operational efficiency and overall business performance
  • Evaluating the effectiveness of corporate governance structures in companies backed by private equity investments
  • Examining how the regulatory environment in different regions affects the operations, investments and performance of private equity and venture capital firms

Research Topic Kickstarter - Need Help Finding A Research Topic?

Asset Management

This list includes a range of research topic ideas focused on asset management, probing into the effectiveness of various strategies, the integration of technology, and the alignment with ethical principles among other key dimensions.

  • Analysing the effectiveness of different asset allocation strategies in diverse economic environments
  • Analysing the methodologies and effectiveness of performance attribution in asset management firms
  • Assessing the impact of environmental, social, and governance (ESG) criteria on fund performance
  • Examining the role of robo-advisors in modern asset management
  • Evaluating how advancements in technology are reshaping portfolio management strategies within asset management firms
  • Evaluating the performance persistence of mutual funds and hedge funds
  • Investigating the long-term performance of portfolios managed with ethical or socially responsible investing principles
  • Investigating the behavioural biases in individual and institutional investment decisions
  • Examining the asset allocation strategies employed by pension funds and their impact on long-term fund performance
  • Assessing the operational efficiency of asset management firms and its correlation with fund performance

Hedge Funds

Here we explore research topics related to hedge fund operations and strategies, including their implications on corporate governance, financial market stability, and regulatory compliance among other critical facets.

  • Assessing the impact of hedge fund activism on corporate governance and financial performance
  • Analysing the effectiveness and implications of market-neutral strategies employed by hedge funds
  • Investigating how different fee structures impact the performance and investor attraction to hedge funds
  • Evaluating the contribution of hedge funds to financial market liquidity and the implications for market stability
  • Analysing the risk-return profile of hedge fund strategies during financial crises
  • Evaluating the influence of regulatory changes on hedge fund operations and performance
  • Examining the level of transparency and disclosure practices in the hedge fund industry and its impact on investor trust and regulatory compliance
  • Assessing the contribution of hedge funds to systemic risk in financial markets, and the effectiveness of regulatory measures in mitigating such risks
  • Examining the role of hedge funds in financial market stability
  • Investigating the determinants of hedge fund success: A comparative analysis

Financial Planning and Advisory

This list explores various research topic ideas related to financial planning, focusing on the effects of financial literacy, the adoption of digital tools, taxation policies, and the role of financial advisors.

  • Evaluating the impact of financial literacy on individual financial planning effectiveness
  • Analysing how different taxation policies influence financial planning strategies among individuals and businesses
  • Evaluating the effectiveness and user adoption of digital tools in modern financial planning practices
  • Investigating the adequacy of long-term financial planning strategies in ensuring retirement security
  • Assessing the role of financial education in shaping financial planning behaviour among different demographic groups
  • Examining the impact of psychological biases on financial planning and decision-making, and strategies to mitigate these biases
  • Assessing the behavioural factors influencing financial planning decisions
  • Examining the role of financial advisors in managing retirement savings
  • A comparative analysis of traditional versus robo-advisory in financial planning
  • Investigating the ethics of financial advisory practices

Free Webinar: How To Find A Dissertation Research Topic

The following list delves into research topics within the insurance sector, touching on the technological transformations, regulatory shifts, and evolving consumer behaviours among other pivotal aspects.

  • Analysing the impact of technology adoption on insurance pricing and risk management
  • Analysing the influence of Insurtech innovations on the competitive dynamics and consumer choices in insurance markets
  • Investigating the factors affecting consumer behaviour in insurance product selection and the role of digital channels in influencing decisions
  • Assessing the effect of regulatory changes on insurance product offerings
  • Examining the determinants of insurance penetration in emerging markets
  • Evaluating the operational efficiency of claims management processes in insurance companies and its impact on customer satisfaction
  • Examining the evolution and effectiveness of risk assessment models used in insurance underwriting and their impact on pricing and coverage
  • Evaluating the role of insurance in financial stability and economic development
  • Investigating the impact of climate change on insurance models and products
  • Exploring the challenges and opportunities in underwriting cyber insurance in the face of evolving cyber threats and regulations

Quantitative Finance

These topic ideas span the development of asset pricing models, evaluation of machine learning algorithms, and the exploration of ethical implications among other pivotal areas.

  • Developing and testing new quantitative models for asset pricing
  • Analysing the effectiveness and limitations of machine learning algorithms in predicting financial market movements
  • Assessing the effectiveness of various risk management techniques in quantitative finance
  • Evaluating the advancements in portfolio optimisation techniques and their impact on risk-adjusted returns
  • Evaluating the impact of high-frequency trading on market efficiency and stability
  • Investigating the influence of algorithmic trading strategies on market efficiency and liquidity
  • Examining the risk parity approach in asset allocation and its effectiveness in different market conditions
  • Examining the application of machine learning and artificial intelligence in quantitative financial analysis
  • Investigating the ethical implications of quantitative financial innovations
  • Assessing the profitability and market impact of statistical arbitrage strategies considering different market microstructures

Treasury Management

The following topic ideas explore treasury management, focusing on modernisation through technological advancements, the impact on firm liquidity, and the intertwined relationship with corporate governance among other crucial areas.

  • Analysing the impact of treasury management practices on firm liquidity and profitability
  • Analysing the role of automation in enhancing operational efficiency and strategic decision-making in treasury management
  • Evaluating the effectiveness of various cash management strategies in multinational corporations
  • Investigating the potential of blockchain technology in streamlining treasury operations and enhancing transparency
  • Examining the role of treasury management in mitigating financial risks
  • Evaluating the accuracy and effectiveness of various cash flow forecasting techniques employed in treasury management
  • Assessing the impact of technological advancements on treasury management operations
  • Examining the effectiveness of different foreign exchange risk management strategies employed by treasury managers in multinational corporations
  • Assessing the impact of regulatory compliance requirements on the operational and strategic aspects of treasury management
  • Investigating the relationship between treasury management and corporate governance

Financial Technology (FinTech)

The following research topic ideas explore the transformative potential of blockchain, the rise of open banking, and the burgeoning landscape of peer-to-peer lending among other focal areas.

  • Evaluating the impact of blockchain technology on financial services
  • Investigating the implications of open banking on consumer data privacy and financial services competition
  • Assessing the role of FinTech in financial inclusion in emerging markets
  • Analysing the role of peer-to-peer lending platforms in promoting financial inclusion and their impact on traditional banking systems
  • Examining the cybersecurity challenges faced by FinTech firms and the regulatory measures to ensure data protection and financial stability
  • Examining the regulatory challenges and opportunities in the FinTech ecosystem
  • Assessing the impact of artificial intelligence on the delivery of financial services, customer experience, and operational efficiency within FinTech firms
  • Analysing the adoption and impact of cryptocurrencies on traditional financial systems
  • Investigating the determinants of success for FinTech startups

Research topic evaluator

Commercial Banking

These topic ideas span commercial banking, encompassing digital transformation, support for small and medium-sized enterprises (SMEs), and the evolving regulatory and competitive landscape among other key themes.

  • Assessing the impact of digital transformation on commercial banking services and competitiveness
  • Analysing the impact of digital transformation on customer experience and operational efficiency in commercial banking
  • Evaluating the role of commercial banks in supporting small and medium-sized enterprises (SMEs)
  • Investigating the effectiveness of credit risk management practices and their impact on bank profitability and financial stability
  • Examining the relationship between commercial banking practices and financial stability
  • Evaluating the implications of open banking frameworks on the competitive landscape and service innovation in commercial banking
  • Assessing how regulatory changes affect lending practices and risk appetite of commercial banks
  • Examining how commercial banks are adapting their strategies in response to competition from FinTech firms and changing consumer preferences
  • Analysing the impact of regulatory compliance on commercial banking operations
  • Investigating the determinants of customer satisfaction and loyalty in commercial banking

International Finance

The folowing research topic ideas are centred around international finance and global economic dynamics, delving into aspects like exchange rate fluctuations, international financial regulations, and the role of international financial institutions among other pivotal areas.

  • Analysing the determinants of exchange rate fluctuations and their impact on international trade
  • Analysing the influence of global trade agreements on international financial flows and foreign direct investments
  • Evaluating the effectiveness of international portfolio diversification strategies in mitigating risks and enhancing returns
  • Evaluating the role of international financial institutions in global financial stability
  • Investigating the role and implications of offshore financial centres on international financial stability and regulatory harmonisation
  • Examining the impact of global financial crises on emerging market economies
  • Examining the challenges and regulatory frameworks associated with cross-border banking operations
  • Assessing the effectiveness of international financial regulations
  • Investigating the challenges and opportunities of cross-border mergers and acquisitions

Choosing A Research Topic

These finance-related research topic ideas are starting points to guide your thinking. They are intentionally very broad and open-ended. By engaging with the currently literature in your field of interest, you’ll be able to narrow down your focus to a specific research gap .

When choosing a topic , you’ll need to take into account its originality, relevance, feasibility, and the resources you have at your disposal. Make sure to align your interest and expertise in the subject with your university program’s specific requirements. Always consult your academic advisor to ensure that your chosen topic not only meets the academic criteria but also provides a valuable contribution to the field. 

If you need a helping hand, feel free to check out our private coaching service here.

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Topic Kickstarter: Research topics in education

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In the spotlight: Performance management that puts people first

In volatile times, companies are under outsize pressure to respond to economic, technological, and social changes. Effective performance management systems can be a powerful part of this response. They’re designed to help people get better in their work, and they offer clarity in career development and professional performance. And then there’s the big picture: companies that focus on their people’s performance are 4.2 times more likely to outperform their peers, realizing an average 30 percent higher revenue growth and experiencing attrition five percentage points lower (see sidebar, “About the research”). Companies that focus on their people and organizational health also reap dividends in culture, collaboration, and innovation—as well as sustained competitive performance. 1 Alex Camp, Arne Gast, Drew Goldstein, and Brooke Weddle, “ Organizational health is (still) the key to long-term performance ,” McKinsey, February 12, 2024.

Today, company leaders lack full confidence in most performance management systems—despite these systems’ importance and value—citing fragmentation, the existence of informal or “shadow” systems, misalignment, and inconsistency as common challenges. What sort of systems fit the company’s needs? Should rewards focus on individual or team goals? Where are limited resources best spent?

About the research

The insights in this article draw from a comprehensive review of industry best practices, including the experiences of more than 30 global companies across sectors, as well as research by the McKinsey Global Institute (MGI) into how companies gain a competitive edge and deliver top-tier financial results. Specifically, MGI studied more than 1,800 companies with revenues of greater than $100 million. 1 Performance through people: Transforming human capital into competitive advantage ; MGI, February 2, 2023. The article’s author team also completed a study of more than 50 companies’ performance management practices, aiming to provide a nuanced understanding of how organizations approach and execute performance management.

An understanding of the four basic elements of performance management—goal setting, performance reviews, ongoing development, and rewards—provides a foundation for answering these questions and more. Of course, the right performance management system will vary by organization. Leaders who embrace a fit-for-purpose design built on a proven set of core innovations can build motivational and meritocratic companies that attract and retain outstanding employees.

How leading companies approach performance management

Our research across a set of global companies found that despite widespread agreement about certain performance management best practices—such as offering regular feedback outside of an annual review—many companies remain stuck in old ways of working. There are many design choices that can determine the characteristics of a performance management system, but some are more critical than others (Exhibit 1). These decisions—and how they interact with each other—will help determine how the performance management system maps onto the company’s overarching strategy.

Goal setting

Two critical design decisions relate to goal setting: the number of performance management systems used and whether to prioritize individual or team performance goals.

Degree of differentiation. The simplest and best option for many organizations is a single performance management system to address the needs of all employees. However, in more-complex companies with several employee groups, more than one system might be necessary. Manufacturing companies, for instance, may employ three performance management systems with few commonalities: one for sales, in which sales agents are provided direct incentives for the number of goods sold; one for production, with a monthly rhythm focusing on improving core production KPIs; and one for executives, in which the focus might be related more to annual objectives and leadership behavior.

Considerations for these choices often revolve around the nature of the work and the ease of quantifying outputs. For roles in which performance can be easily measured through tangible metrics, such as sales and production, a system emphasizing quantifiable outcomes may be more suitable. On the other hand, for roles involving tasks that are less easily measured, such as those in R&D, a performance management system should be designed to accommodate the nuanced and less tangible aspects of their contributions.

The nucleus of performance. Many organizations have traditionally placed a strong emphasis on individual performance, rooted in the belief that individual accountability drives results. In recent years, there has been a noticeable shift toward recognizing the importance of the team in achieving overall organizational success.

At a large European online retailer, for instance, the focus of performance management has been put on the team rather than the individual. Goals are set for the team, feedback is given to the team, and the performance appraisal is conducted for the team. Example performance metrics for teams can include project completion timelines, cross-functional collaboration success, and the achievement of collective milestones. On an individual level, the company assesses performance using a sophisticated model that prescribes skills and behaviors for 14 job families, each with up to four hierarchies.

Another prominent company in the automotive industry underscores the team as the cornerstone of performance. The teams could be defined along both functional and organizational lines—such as the division or the business line—and the company linked the organizational lines’ performance to the individuals’ compensation.

Performance reviews

Performance reviews raise the question of how to balance the individual objectives and their appraisal with respect to the “what” and the “how,” as well as whether review responsibility should lie primarily with managers, committees, or a combination of both.

Performance formula: What versus how. The balance between setting objectives and assessing what employees accomplish and how they go about their work is the central focus here. To measure the “what,” reviews have traditionally used KPIs, concentrating on quantifiable metrics and specific targets and emphasizing measurable outcomes and achievements. 2 For more on metrics best practices and how they can help leaders avoid pitfalls in their performance management systems, see Raffaele Carpi, John Douglas, and Frédéric Gascon, “ Performance management: Why keeping score is so important, and so hard ,” McKinsey, October 4, 2017.

However, for many roles and in many segments of the company, the work is complex, multifaceted, and fast-paced and can be difficult to capture with rather static KPIs. Consequently, many companies have reverted to using objective key results (OKRs) to link results to defined objectives. The objectives represent the qualitative, aspirational goals an individual or team aims to achieve, while the key results are the quantifiable metrics used to measure progress toward those objectives. The objectives provide context and direction, capturing the broader strategic intent behind the measurable key results.

Companies that explicitly focus a portion of performance reviews on the “how” consider qualities such as collaboration, communication, adaptability, and ethical decision making. Considering behavior and conduct, in particular, can help assess leaders whose teams’ outcomes are hard to measure—such as long-term projects, complex initiatives, or qualitative improvements that may not have easily quantifiable metrics. About three in five companies in our sample look at a mix of both what and how, which can equip managers with a more comprehensive understanding of not only tangible results but also the underlying approach and mindset that contributed to those outcomes.

Review responsibility. In structuring accountability for conducting performance reviews, companies tend to lean on managers, committees, or a combination of both.

Managers should play a central role, and their discretion should be a significant factor in performance assessments because they can judge the context in which an employee has been working. For example, when evaluating performance, it’s crucial to consider the headwinds and tailwinds that the business, team, or employee faced during the evaluation period. External factors, market conditions, and organizational dynamics can significantly affect an employee’s ability to achieve their goals, and considering them helps provide a fair and contextual assessment.

In this context, another design question emerges: whether to appraise employees against OKR fulfilment or the effort they put into achieving the desired outcome. Particularly in many large digital players, OKRs are set as “moonshot” goals—objectives so ambitious they are difficult to achieve. Managers can help ensure that, at the end of the performance cycle, an employee is assessed against not only OKR fulfillment but also—and to an even greater degree—how hard they tried given the resources available to them.

Managers’ points of view, formed with knowledge of the circumstances that produced employees’ performance, produce richer assessments that are sensitive to context—given that managers work closely with their team members and have firsthand knowledge of the challenges, workloads, and specific situations that each employee encounters.

Committees, meanwhile, bring diverse perspectives and can mitigate biases that might arise from individual managers’ subjectivity. Committees can provide a checks-and-balances system, promoting consistency and standardization in the evaluation process.

A combination of these two approaches can be an effective solution. Senior managers and high performers across hierarchies could be discussed in committees, while the rest of the workforce could be evaluated by their direct managers. This integrated approach leverages the contextual insights of managers while also incorporating the diverse viewpoints and standardization that committees offer, particularly for more-senior or high-impact roles.

Regardless of the review responsibility structure, it’s worth noting that more and more managers, committees, and employees are using generative AI (gen AI) to aggregate and extract information to inform performance reviews. For example, some employees may toil to define clear, specific, and measurable goals that align with their career aspirations; gen AI can help create a first draft and iterate based on their role, helping the employee focus on their specific growth areas as well as gauge improvement on an ongoing basis. Managers and committees, meanwhile, used to spend a lot of time gathering performance metrics from different sources and systems for employee evaluation. Gen AI can aggregate input from various sources into a consolidated format to provide managers with a more comprehensive starting point for reviews.

Beyond employees’ formal professional-development opportunities, their managers’ capability to set goals, appraise performance fairly and motivationally, and provide feedback is one of the most critical success factors for an effective performance management system. As a result, many companies have pivoted to invest in focused capability building.

Ongoing development

Another key aspect to consider when designing a performance management system is the focus of the assessment: will it evaluate past performances, or will the emphasis be placed on creating an understanding and foundation for further growth?

A backward-looking assessment will focus on fulfillment of the what and how objectives to create a fair basis for ranking and related consequences. However, many companies are pivoting to complement this assessment or are even focusing entirely on a developmental appraisal. In this approach, the focus is on truly understanding the strengths and weaknesses of the individual as a basis for further development, capability building, and personal growth.

Against that backdrop, rather than concentrating solely on top performers, an inclusive developmental system should cater to the growth needs of employees across all levels and backgrounds. McKinsey research emphasizes the importance of ongoing development for all employees, including—crucially—efforts tailored specifically for women 3 Women in the Workplace 2023 , McKinsey, October 5, 2023. and other underrepresented groups. 4 Diversity matters even more: The case for holistic impact , McKinsey, December 5, 2023. Such development programs not only foster a more equitable culture but also help unlock the full potential of the entire workforce.

Traditionally, many companies have used relative ratings to compare and rank employees against one another, often resulting in a forced distribution or curve. Employees are placed into categories or tiers based on their relative performance, with a predetermined percentage falling into each category (for example, top 10 percent, middle 70 percent, and bottom 20 percent).

Many companies today are simplifying their ratings systems so employees understand where they stand while shifting toward development approaches tailored to individuals’ strengths and weaknesses. The goal is to identify areas for growth and provide targeted support to help employees enhance their capabilities and skills.

While assessing performance remains important, the emphasis should be on using those assessments as a starting point for identifying developmental opportunities, with an understanding of both strengths and weaknesses and the specific development needs to improve performance. The focus shifts from mere evaluation to understanding the underlying factors that contribute to an individual’s performance, be it skills gaps, mindsets, or environmental factors.

Four reward categories—compensation, career progression, development opportunities, and recognition—remain the core pillars of an effective performance management system. Most leading companies provide individual rewards (as opposed to team- or corporate-driven ones), with equal relevance given to short- and long-term incentives, looking at impact holistically and balancing investment in all four reward categories.

Under certain circumstances, it may make sense to emphasize financial rewards, particularly in sales functions or other roles where monetary incentives are highly valued. Indeed, some organizations may double down on monetary compensation, offering significantly higher pay packages to their top performers, because money is seen as a key motivator in these roles.

In other cases, it may be more effective to take money off the table and emphasize nonfinancial rewards, such as recognition, flexibility, and career development opportunities. While base pay may remain the same across the firm, high performers can be rewarded with faster career progression, more recognition, and better development opportunities. A 2009 McKinsey survey found that “three noncash motivators—praise from immediate managers, leadership attention (for example, one-on-one conversations), and a chance to lead projects or task forces” were “no less or even more effective motivators than the three highest-rated financial incentives: cash bonuses, increased base pay, and stock or stock options.” Furthermore, “The survey’s top three nonfinancial motivators play critical roles in making employees feel that their companies value them, take their well-being seriously, and strive to create opportunities for career growth.” 5 “ Motivating people: Getting beyond money ,” McKinsey Quarterly , November 1, 2009. More than a decade later, McKinsey research found that managers and employees remain misaligned: specifically, employers overlook the relational elements—such as feeling valued by a manager and the organization and feeling a sense of belonging—relative to how important these factors are to employee retention (Exhibit 2). 6 “ ‘ Great Attrition’ or ‘Great Attraction’? The choice is yours ,” McKinsey Quarterly , September 8, 2021. Indeed, the importance of nonmonetary incentives represents a consistent theme in performance management research and inquiry.

Given the time and effort required to effectively implement nonfinancial rewards, it’s crucial for organizations to carefully consider how to deploy these rewards strategically with employee groups. The decision of where to place emphasis should align with the organization’s culture, values, and the specific workforce’s motivations.

It’s worth noting that companies focusing on team achievement over individual performance also tend to value praise of the team. Public recognition and praise for effective teamwork and joint accomplishments can foster a sense of unity, camaraderie, and motivation.

Things to get right

Of the global companies we observed, there was a shared set of enabling factors across those with effective performance management systems. These things are fairly intuitive, but they are hard to practice well. Done consistently, they can produce powerful results.

  • Ensure that performance management systems are agile. Systems should allow for goals to be easily updated so the workforce—and therefore the organization—can respond to quickly changing conditions. The processes themselves should also be agile. For instance, relationships and interactions between managers and employees should allow for coaching that is close to real time so employees are consistently being pushed in the right direction—and learning to create that momentum themselves.
  • Provide regular feedback. Annual reviews can create a bottleneck on managers and the C-suite. More regular performance conversations can be successful in a variety of formats; quarterly, weekly, and casual check-ins should supplement formal reviews. Conversations can be about both the what and the how of the work and be a source of ongoing coaching.

If reviews remain once a year rather than more frequent, top management may consider prioritizing their direct involvement in the evaluation process to keep a pulse on employee sentiment and progress. A leading financial institution in Europe chose this route and found it was able to build a strong capability-building program around a feedback culture that is unafraid of difficult conversations.

  • Establish an effective fact base. According to our research, only two in five companies use both upward and downward evaluation in individual performance reviews. To establish a more comprehensive fact base, organizations can implement robust 360° review processes that solicit feedback from an employee’s manager, peers, direct reports, and even customers or stakeholders outside the company. Many leaders have found that 360° reviews offer a comprehensive understanding of an individual’s performance because such reviews consider perspectives from both those who are led and those who are in leadership roles.
  • Maintain rating and differentiation. Many companies have reassessed their approach to employee ratings and the subsequent differentiation of consequences. While some companies have eliminated ratings altogether, most companies have been evolving their systems to drive motivation, recognize and incentivize performance, and create a “talent currency.” This means a high performer from one division is considered by the organization to be of the same caliber as one from another division. Overall, leaders are pushing for simplification, such as moving from a seven-tier approach to a four-tier or even three-tier system. There is also a stronger link between ratings and outcomes, as well as a shift from forced distribution to distribution guidance.
  • Employ gen AI. Gen AI—the latest technology to change the business landscape—can be a tool to support select elements of performance management, such as setting goals and drafting performance reviews. A manager could use the technology to aggregate and synthesize input from different sources to draft communications to and about employees more efficiently, freeing them to focus on the core value driving parts of performance management and giving more time for personal interactions with their employees, such as coaching and feedback. 7 For more, see People and Organization Blog , “ Four ways to start using generative AI in HR ,” blog post by Julian Kirchherr, Dana Maor, Kira Rupietta, and Kirsten Weerda, McKinsey, March 4, 2024.

Getting started

Companies can get started by understanding where they are now. Specifically, they should assess their organizations’ current performance culture, including the level of adoption of the existing performance management system and its quality. Decision makers should then use the following three questions to check the health of their performance management efforts and outline their ambitions for performance management:

  • Are we getting the expected returns from the time invested in the performance management process, and does it drive higher performance and capabilities?
  • Does the current performance management system reflect the needs and context of this particular business or workforce segment?
  • Do we have a performance culture? (Hint: How frequent are employees’ coaching interactions? How clear and differentiated is feedback?)

Many traditional approaches to people management are unlikely to suffice in today’s top-performing organizations. The research-backed benefits of prioritizing people’s performance, from enhanced revenue growth to lower attrition rates, underscore the strategic importance of these systems. By embracing a fit-for-purpose design anchored in the key elements of performance management, organizations can position themselves as dynamic and adaptive employers.

Simon Gallot Lavallée is an associate partner in McKinsey’s Milan office, where Andrea Pedroni  is a partner; Asmus Komm is a partner in the Hamburg office; and Amaia Noguera Lasa is a partner in the Madrid office.

The authors wish to thank Katharina Wagner, Brooke Weddle, and the many industry professionals who contributed to the development of this article.

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Black and white phot of Professor Jose Liberti standing on stage and speaking to a crowd

Welcome to the latest installment of our new series, “The Industry Ahead,” in which our faculty share the latest trends in hiring across a variety of career fields. This time we’re exploring the wide world of finance with clinical professor Jose Liberti, who teaches MBA courses at Kellogg and has extensive experience with financial services businesses. 

“When students tell me they’re thinking about finance,” Professor Liberti  says, “I ask them two questions: where are you coming from and where do you want to go?” 

Liberti is the right person to ask. Before becoming a professor, he worked as a financial advisor for Citibank, and now consults with a range of financial services businesses including private equity firms, financial advisory services and others including involvement with Point 72 Academy, an investment analyst training program. 

He uses his experience and insights to help students and others interested in finance careers aim for rewarding paths that make use of their past experience, whatever it may be. 

Diverse paths and destinations  

Liberti sees a lot of diversity among students interested in finance. “It might be that they have a background in finance itself,” he says. “Or something quantitative like engineering, or a mix of finance and consulting. It helps to know what they are building on.” 

While quantitative experience makes for a strong finance foundation, Kellogg students from all backgrounds successfully pursue and land finance jobs, including those with military, teaching, or nonprofit experience.  

No matter their background, students interested in finance must think about the industry and role that suits them best. “What are students attracted to?” Liberti says. “It used to be mostly about pursuing banking in New York City. But interests have become much more divergent in the last 10 to 15 years. "The past hyper-focus on pursuing high-salary jobs within the industry has diversified, and people are more interested in finding the right fit.” 

That’s evident in the wide range of targets for Kellogg students pursuing finance, as Liberti notes: “It might be corporate finance like M&A inside Boeing or Cisco. Or middle-market private equity. Or working with owners of a family enterprise to make investments after they sell their business.” Some students even learn how to raise funds to purchase and run a single business, including managing all finance activities.

Jose Liberti teaches a classroom of students

A strategic, specialized field 

Liberti sees finance as an increasingly strategic, specialized field.  

“Some people are surprised by how strategic finance is,” he says. “In the first year of the MBA program, students begin to understand how much logic there is to it and become interested in learning more about what makes it work.” 

What makes it work, these days, seems to be specialization. “Demand is increasing for finance specialists,” Liberti says.  

The good news is that most people pursuing finance can use their past to shape their future professional role, including specialization. “It’s about levering up what you’ve already done,” Liberti says. “If you were an oil-and-gas engineer or worked in the music industry, for example, you can come to Kellogg and dial your focus on corporate finance, which would allow you become a very hot commodity working for a private equity firm that invests in oil or the music industry.” In a similar way, students with past roles focused on climate, policy or sustainability can focus on impact investing at Kellogg to shape their post-MBA career. 

Finance is a popular destination for Kellogg students, and incoming MBA students wanting to switch into this industry can start their learning journey even before they arrive on campus. The Career Management Center offers a wealth of programming and resources, including a summer alumni panel just for the finance industry, interviewing and an in-depth career training via the Launchpad pre-MBA course. 

“Don’t kill your past,” Liberti advises. “Use your expertise to increase your finance job prospects.”

Professor Jose Liberti mingling with Kellogg students and graduates

The Kellogg advantage 

Kellogg enables anyone pursuing finance to gain key skills and career opportunities. Among key finance-related offerings are: 

  • A dedicated finance major. Kellogg offers many majors and pathways  in its MBA programs. The finance major  is tailored for students wanting a fundamental knowledge base and practical tools that are essential for careers in the field. Students combine these classes with other essential coursework in data analytics and negotiations to create a powerful foundation for finance careers. 
  • Specialized finance pathways that let students go deeper into specific topic areas, including venture capital and private equity , asset management , and growth and scaling .  
  • Experiential learning opportunities offering hands-on experience outside the classroom. Kellogg offers a wide variety of experiential courses  in many subject areas, including finance. Lab courses in PE, VC and asset management immerse students in a client project with a real company, and the annual PE/VC Conference . 
  • Student-led clubs that bring together peers interested in finance careers and connect them with companies and alumni. Groups at Kellogg  include the Investment Banking and Capital Markets Club, Corporate Finance Club, Fintech club, Private Equity Club, Investment Management Club and many others. 
  • Case competitions, which let students take their hands-on experiences in finance even further by working with a team of classmates to solve a challenge. Kellogg teams participate in and win top competitions, and a Kellogg group took first place this year in the Venture Capital Investment Competition (VCIC), the world’s top VC competition for MBAs.  
  • A deep and broad alumni network that invests in you . Many Kellogg alumni work in finance roles, with the highest concentrations in Chicago, New York, San Francisco and Los Angeles. Of those, a large segment work in private equity or venture capital. 
  • Career guidance tailored for you. The Career Management Center  offers unlimited one-on-one coaching to students, a dedicated research specialist to help you chart your professional path, and resources that extend even after graduation. For students particularly interested in careers in finance, clubs and the CMC offer workshops and learning tools just for finance interviewing. Students can also go on company treks to firms in PE, VC and investment banking. 

Read next 

Curious about what an MBA in finance at Kellogg can do for you? Follow the links here to read about students and alumni in finance and discover the latest research from our finance faculty . Or, explore our degree programs  to find the right fit for you.  

Collaborative ML research projects within a single cloud environment

Andika rachman.

AVP, Head of AI, Bank Rakyat Indonesia

Yoga Yustiawan

AI Research Lead, Bank Rakyat Indonesia

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As one of the largest banks in Indonesia and Southeast Asia, Bank Rakyat Indonesia (BRI) focuses on small-to-medium businesses and microfinance. At BRI, we established a Digital Banking Development and Operation Division to implement digital banking and digitalization. Within this division, a department we call Digital BRIBRAIN develops a range of AI solutions that span customer engagement, credit underwriting, anti-fraud and risk analytics, and smart services and operations for our business and operational teams.

Within Digital BRIBRAIN, our AI research team works on projects like the BRIBRAIN Academy — a collaborative initiative with higher education institutions that aims to nurture AI and ML in banking and finance, expand BRI’s AI capabilities, and contribute to the academic community. The program enables students from partner universities to study the application of AI in the financial sector, selecting from topics such as unfair bias and fairness, explainable AI, Graph ML, federated learning, unified product recommendations, natural language processing and computer vision.

Based on our long history and work with Google Cloud, with some Vertex AI technology implemented in other use cases, we selected its products and services to provide a sandbox environment for this research effort with partner universities. This research covers a range of use cases and concepts, including the following:

1. Fairness analysis on credit scoring research in banking

Industry-wide, banks and other financial institutions use credit scoring to determine an individual’s or organization’s credit risk when applying for a loan. Historically, this is a manual and paper-driven process that uses statistical techniques and historical data. There is considerable potential benefit to apply automation to the credit scoring process, but only if it can be done responsibly. 

The use of AI in credit scoring is a noted and well-documented area of concern for algorithmic unfairness. Providers should know which variables are used in credit scoring AI models and take steps to reduce the risk of disparate model outputs across marginalized groups. To help bring the industry closer to a solution where unfair bias is appropriately mitigated, we decided to work on fairness analysis in credit scoring as one of our BRIBRAIN Academy research projects.

Fairness has different meanings in different situations. To help minimize poor outcomes for lenders and applicants, we measured bias in our models with two fairness constraints, demographic parity difference and equalized odds difference, and reduced unfair bias with post-processing and reduction algorithms. As a result, we found that the fairness of demographic parity improved from 0.127 to 0.0004, and equalized odds from 0.09 to 0.01. All of the work we have done thus far is still in the research and exploration stage, as we continue to discover the limitations that need to be navigated to improve fairness. 

2. Interpreting ML model decisions for credit scoring using explainable AI

Historical data is used to train a model to evaluate the creditworthiness of an application. However, the lack of transparency in these data can make it challenging to understand, and the ability to help others interpret results and predictions from AI models is becoming more important.

An explanation that truly represents a model’s behavior and earns the trust of concerned stakeholders is critical. With explainable AI, we can get a deeper level of understanding of how a credit score is created. We can also use the features we built in the model as filters for different credit scoring decisions. To conduct this research collaboration, we needed to leverage a secure platform with strict access controls for data storage and maintenance.

3. Sentiment analysis of financial chatbots using graph ML

Chatbots are computer programs that simulate human conversations, with users communicating via a chat interface. Some chatbots can interpret and process users' words or phrases and provide instant preset answers without sentiment knowledge. 

Unfortunately, responses are sometimes taken out of context because they do not recognize the relationship between words. This means we had to represent chatbot data that can learn relationships between words through preprocessing using graph representation learning. These methods help to account for linguistic, semantic, and grammatical features that other natural language processing techniques like bag-of-words (BOW) models and Term Frequency-Inverse Document Frequency (TF-IDF) representation cannot catch. 

We built a sentiment analysis model for financial chatbot responses using graph ML, allowing us to identify which conversations are positive, neutral, or negative. This helps the chatbot avoid mistakes in categorizing user responses.    

Deploying data warehousing, ML, and access management tools

Google Cloud met our needs for these projects with infrastructure and services, such as its cloud data warehouse BigQuery and  its unified machine learning (ML) development platform Vertex AI , which offers a range of fully-managed  tools that enabled us to undertake our ML builds.

We also used Vertex AI Workbench , a Jupyter notebook-based development environment, to create and manage virtual machine instances adjusted to researchers’ needs. This enabled us to perform data preparation, model training, and evaluation of our use case model. 

Using the structured data stored in BigQuery, we were able to write our own training code and train custom models through our preferred ML framework. Furthermore, we employed Identity and Access Management (IAM) to deliver fine-grained control and management of access to resources.

The general architecture we used to support each research topic is below:


We loaded masked research into BigQuery and gave researchers access to Vertex AI for specific BRIBRAIN Academy projects, assigning a virtual machine on which to conduct research. They could then use Vertex AI Workbench to perform the pipeline steps illustrated above in Vertex AI Workbench and access required data in BRIBRAIN Academy projects via BigQuery. 

To build and run our ML solution efficiently and cost-effectively, we limited the resources available to each user. However, Vertex AI enabled us to modify instance resources to accommodate cases where significant data volumes were needed to create a model. 

At the same time, Google Cloud data security services allowed us to protect data at rest and in transit from unauthorized access while creating and managing specific access to project data and resources. We provided specific access to researchers through BigQuery and notebook custom roles, while developers received administration roles.

Undertaking research projects within a single platform

With Google Cloud, Digital BRIBRAIN now has the power to explore use cases from BRIBRAIN Academy and apply lessons learned in live business projects.

For example, we have already used research around AI explainability to help us develop end-to-end ML solutions for recommender systems in our branchless banking services, known as BRILink agents. We also built a mobile application containing recommendations with AI explanations. In an environment where many users are unfamiliar with ML and its complexities, AI explainability can help make ML solutions more transparent so they can understand the rationales behind recommendations and decisions.  

With our success to date, we plan to evolve our ML and data management capabilities. At present, we use BigQuery to store mostly tabular data for training and building models. Now, we are expanding these capabilities to store, process, and manage unstructured data, such as text, files and images, with Cloud Storage . In addition, we plan to monitor app usage using reports generated through Google Analytics for Firebase with some of the ML solutions available in our web-based applications. 

Google Cloud gives us the ability to store our data, build and train ML model workflows, monitor access control, and maintain data security — all within a single platform. With the promising results we’ve seen, we hope to be able to tap into more of Vertex AI capabilities to support ongoing developments at BRIBRAIN Academy.

  • AI & Machine Learning
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    The Journal of Finance publishes leading research across all the major fields of financial research. It is the most widely cited academic journal on finance and one of the most widely cited journals in economics as well. Each issue of the journal reaches over 8,000 academics, finance professionals, libraries, government and financial ...

  7. Frontiers

    Financial management behavior is the acquisition, allocation, and use of financial resources oriented toward some goal. Empirical evidence supports that, if families achieve effective financial management, both their economic well-being and their financial satisfaction improve at the long term (Consumer Financial Protection Bureau, 2015 ...

  8. 84309 PDFs

    The financial management application implemented for Lamoela Bar has brought innovation in the management of micro, small, and medium-sized businesses (MSMEs) in the handicraft industry. With an ...

  9. Financial Management

    Financial Management, FMA's flagship quarterly journal, publishes high-quality, peer-reviewed research in all established and emerging areas of financial economics.The Editorial Board is led by Editors Michael Goldstein, Babson College, Kathleen Kahle, University of Arizona, and Shawn Thomas, University of Pittsburgh.. Current Issues In addition to the journal's quarterly publications, the ...

  10. Motivations for personal financial management: A Self-Determination

    Despite the importance of financial knowledge and sound money management for financial wellness, research has yet to systematically examine the motivations that drive people to learn about or better manage their finances. Illustratively, in a review of more than 500 peer-reviewed journal articles, ...

  11. Financial Management: Articles, Research, & Case Studies

    Lazy Prices. by Lauren Cohen, Christopher J. Malloy, and Quoc Nguyen. The most comprehensive information windows that firms provide to the markets—in the form of their mandated annual and quarterly filings—have changed dramatically over time, becoming significantly longer and more complex. When firms break from their routine phrasing and ...

  12. Full article: Financial management practices and life satisfaction

    2.1. Financial management practices. The concept of financial management practices, also referred to in the extant literature as financial behavior (Hilgert et al., Citation 2003; Xiao et al., Citation 2006, Citation 2009) has been defined in several ways.For example, Van Horne and Wachowicz (Citation 2002) defined it as the acquisition and prudent utilization of financial resources to attain ...

  13. Journal of Risk and Financial Management

    Journal of Risk and Financial Management is an international, peer-reviewed, open access journal on risk and financial management, published monthly online by MDPI. ... Research on actuarial risk management practices (ARMP) and insurance firm performance has revealed inconsistent results. Therefore, a mediating factor such as innovation is ...

  14. Financial Management Explained: Scope, Objectives & Importance

    Financial management gets more complicated as the company grows and adds finance and accounting contractors or staffers. You must ensure your employees get paid with accurate deductions, properly file taxes and financial statements, and watch for errors and fraud. This all circles back to our opening discussion of balancing strategic and ...

  15. Some key developments in international financial management

    Forty years ago, in a special issue of this journal, the areas of research pertinent to international financial management were addressed (Stehle 1981, pp. 75-76) and a status report on the theory of international capital markets was given (Franke 1981, pp. 51-66). After four decades, this special issue presents articles of current interest ...

  16. Full article: Improving financial capability: the mediating role of

    This paper investigates the collective impact of financial literacy and inclusion on individuals' financial capability focusing on the mediating role of financial behaviour. The research is conducted on an individual-level survey. The relationships were examined by using PLS-SEM. Financial capability can be improved by increasing individuals ...

  17. Link between Financial Management Behaviours and Quality of

    The results are consistent with the research conducted to date, which indicates that the quality of relationships is related to the efficiency of their financial management (cf. [1,2,11,16]). They also indirectly point to the approach adopted throughout the research that the financial area is the foundation of the ability to meet many needs.

  18. Financial Management Research Paper Topics

    The field of financial management offers a vast array of research paper topics. This complex discipline touches every aspect of business operations, influencing strategic planning, decision-making, and organizational growth. Below, you will find a comprehensive list of financial management research paper topics, divided into 10 categories.

  19. Personal Financial Management Behavior Using Digital Platforms and Its

    Financial management errors can have a signi¯cant long-term impact (Estelami 2014, Lusardi et al. 2020). Due to their ignorance of ¯nancial principles, people make ... (Schuchardt et al. 2007). The extensive earlier research on Personal Financial Management Behavior (PFMB) has also focused on its potential lifetime e®ects on things like ...

  20. 120+ Research Topics In Finance (+ Free Webinar)

    These research topic ideas explore a breadth of issues ranging from the examination of capital structure to the exploration of financial strategies in mergers and acquisitions. Evaluating the impact of capital structure on firm performance across different industries; Assessing the effectiveness of financial management practices in emerging markets

  21. (PDF) The Best Practices of Financial Management in Education: A

    This study explored the literature on the best practices of Financial Management in Education utilizing a systematic review analysis design. This study aimed to answer the following questions: 1 ...

  22. Financial Mindfulness Is The Key To Enhancing Your Life

    Stay informed about mindful financial management by reading books, following reputable financial blogs, listening to podcasts, or even taking courses on behavioral personal finance. Knowledge is a ...

  23. Performance management that puts people first

    The research-backed benefits of prioritizing people's performance, from enhanced revenue growth to lower attrition rates, underscore the strategic importance of these systems. By embracing a fit-for-purpose design anchored in the key elements of performance management, organizations can position themselves as dynamic and adaptive employers.

  24. Pursuing a finance career? Use your past experiences as a springboard

    The Career Management Center offers unlimited one-on-one coaching to students, a dedicated research specialist to help you chart your professional path, and resources that extend even after graduation. For students particularly interested in careers in finance, clubs and the CMC offer workshops and learning tools just for finance interviewing.

  25. Cross-Border Payments with Retail Central Bank Digital Currencies

    Many central banks are currently exploring the possibility of issuing retail central bank digital currency (CBDC). While the primary objective varies between jurisdictions, many central banks consider improved cross-border payments as a potential benefit and previous work has shown that CBDC can help overcome some of the frictions in cross-border payments. CBDC is a safe and liquid asset ...

  26. Collaborative ML research projects in a single cloud environment

    This research covers a range of use cases and concepts, including the following: 1. Fairness analysis on credit scoring research in banking. Industry-wide, banks and other financial institutions use credit scoring to determine an individual's or organization's credit risk when applying for a loan.

  27. (Pdf) Factors Influencing Financial Management Behaviour Among

    The study found that there is a significant relationship between financial literacy, family influence, and saving attitude with the student's financial management behaviour, contributing to 63.3% ...

  28. The Deloitte Global 2024 Gen Z and Millennial Survey

    Download the 2024 Gen Z and Millennial Report. 5 MB PDF. To learn more about the mental health findings, read the Mental Health Deep Dive. The 13th edition of Deloitte's Gen Z and Millennial Survey connected with nearly 23,000 respondents across 44 countries to track their experiences and expectations at work and in the world more broadly.

  29. 21 Best One Year MBA Programs for 2024

    Management Analysts, also known as consultants, help organizations improve efficiency and profitability. The median annual wage is $99,410. Financial Managers oversee financial health, including planning, investment activities, and reporting. The median annual wage is $156,100.