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Journal for Studies in Management and Planning
Available at
http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 04 Issue 06
June 2018
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 251
Measuring Financial Literacy of University Academics
By
LA I Arthasad (isuruarthasad@gmail.com)
and
R P C R Rajapakse (champa@sjp.ac.lk)
1
Abstract
This research analyzed Financial Literacy among University lecturers. A sample of
132academics were selected from thelargest university in the national university system in Sri
Lanka to collect data using a structured questionnaire, consisting of 44 questions. Main objective
of the study was to measure the level of basic financial literacy of university academics.The
study found that the, overall financial literacy of the academics (68.52%) is at a medium level.
The knowledge aspect, which was 75.9% is at a medium level, the attitudes aspect, which was
69.7% is also at a medium level. The level of desirable financial behavior of the academics is at a
low level of 59.96%. An important observation is that, although, knowledge and attitudes
aspects are at a medium level, behavior aspect is at a low level. This suggests that financial
knowledge and attitudes of the academics are not fully reflected in their financial behavior. Thus,
a behavioral change in academics is needed where they would fully reflect their knowledge and
attitudes in their behavior.
Key Words: Financial Literacy, Financial Behavior, Attitudes, Perception of stock market
JELL: B40, C93, D10, D91, E70
1. Introduction
‘Financial literacy’ has been defined in many ways by different scholars and institutions
.Organization for Economic Corporation and Development defines financial literacy as ‘A
combination of awareness, knowledge, skill, attitude and behavior necessary to make sound
financial decisions and ultimately achieve individual financial wellbeing (OECD, 2005). Noctor
et al (1992) defines financial literacy as ‘The ability to make informed judgments and to take
effective decisions regarding the use and management of money’.Accordingly, financial literacy
is the basic ability to manage the financial aspects well and make informed decisions. Therefore
financial literacy is important for each and every individual. Those who are financially literate
would make error less financial decisions for them and their families. Consequently, they would
avoid paying more for financial institutions and services, manage their borrowing behavior well,
make efficient investments and ultimately enhance their personal wealth than the others. The
importance of financial literacy can be extendedto the overall economy level. Accurate personal
financial behavior, leads to the efficient movement of funds towards economic activities
enhancing the efficiency and effectiveness of the overall money circulation of the economy and
ultimately leading to economic development. In addition, the informed financial decisions made
1
Dr. R P C R Rajapakse is a senior lecturer attached to the University of Sri Jayewardenepura, Sri Lanka ,
and is the corresponding author
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Journal for Studies in Management and Planning
Available at
http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 04 Issue 06
June 2018
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 252
by the public would lead to fair pricing of financial instruments and reach towards an efficient
market.
Chen, H. and volpe, R.P, (1998), Beal, D.J. and Delpachitra, S.B, (2003), OECD (2009) Lusardi
and Mitchel (2011a) and many others have revealed that the level of financial literacy is not at a
satisfactory level. Atkinson et al (2007) and Szpringer (2007) has found that increasing
complexity of financial products, services and financial markets has made it difficult for the
general public to make informed decision about savings, investments and other personal finance
related aspects. This complexity would lead to asymmetry of information between financial
institutions and customers and in turn topoor financial literacy.Financial crises occurfrom time to
time, due topoor financial literacy of the public. In addition, Continuous changes and
advancements in technology, as well as requirements regarding saving, borrowing, investing,
retirements, medical and insurance,deregulation of financial markets ,easier access to credit as
financial institutions compete strongly with each other for market share, rapid growth in
development and marketing of financial products, and the Government’s encouragement for
people to take more responsibility for their retirement incomes will demand a high level of
financial literacy(Sonia, M. and Abraham, A,2006)
Lack of financial literacy among the public of a countryhas negative consequences at personal as
well as macro level. Deficiency in financial literacy leads to poor personal financial decisions
such as inappropriate personal financial planning, borrowings, savings and investment
decisionsand failure of business organizations. Lack of financial literacy among the public
recorded in both developed and developing countries (Rajapakse, 2017), and the resultant
unfavorable consequences like personal and institutional bankruptcy, economic crises have
increased the demand for a financially literate society and studies towards understanding and
improvement of literacy levels. The emerging nature of the financial market of the country has
boosted the availability of new financial products, new investment opportunities and
technologies. These complexities in the financial economic environment demands financially
literate clientele. ‘Being financially literate’ does not mean that a person should be a financial
expert. A financially literate person is one who is having basic knowledge of finance and the
related environment.Thus measuring the level of financial literacy would facilitate measures
towards the enhancement of the literacy levels. This study focuses on measuring financial
literacy of the university academics of Sri Lanka focusingon the largest university in the national
university system based on the number of students.
2. Review of Literature
According to Rajapakse, R. (2017), different researchers have utilized different methodologies
in measuring financial literacy. Researchers such as; Chen and Volpe (1998); Chen and Volpe
(2002);Lyons A and L. Hunt J (2003); Beal, D. , &Delpachitra, S. ( 2003); Borden L, et.al(2007
); Wagland, S. and Taylor, S.,(2009) ; Kindle, P (2010); Jorgensen B and Savla J (2010); Falahati
L and Paim L ( 2011); Altintas K (2011) ); Agarwalla S , et.al (2012); Mihalčová B et.al (2013);
Opletalová A (2014) ; Edirisinghe, S.et al (2015); Wagner J(2015); Altintas K(2011); Thapa B S
and Nepal S(2015);Edirisinghe U et.al (2017) have focused on a sample of university students or
college students. Mandell L and Schmid Klein L (2009) studied high school student’s. Clarke
Page 3 of 22
Journal for Studies in Management and Planning
Available at
http://edupediapublications.org/journals/index.php/JSMaP/
ISSN: 2395-0463
Volume 04 Issue 06
June 2018
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 253
M., et.al. (2005) chose specific population of university students where higher percentage of
individuals coming from a first marriage, two-parent home with a larger family size, thus
allowing the researcher to assess the modeling of financial tasks at home by father and mother
throughout childhood and modeling by the older and younger siblings. Some others have
concentrated on the adult population (Schagen S and Lines A(1996),Hastings J, et.al (2010), Van
Rooij, M., et.al (2009) AgarwallaS,et.al(2012 ) Falahati L and Paim L (2011) Almenberg J and
Sa ̈ve-So ̈derbergh J( 2011)) and there were other studies that concentrated on university
professors( NayebzadehS,et.al. (2013)), consumer credit users (Lasantha, S. and Pathirawasam,
C (2015)) young employees (Lusardi A, et.al (2009), Agarwalla S., et.al. (2012)), holders of
common stocks and trade a variety of other securities (KorniotisGand Kumar A (2011);
Carpentier C and Jean-Marc S. (2012)), investors (Hussein A. et.al. (2009)) and financially
distressed consumers who telephoned a large national non-profit credit counseling organization
seeking assistance with outstanding credit (Xiao J et.al (2005)) Bucher-Koenen T and Lusardi A
(2011) and Heenkenda S (2014) studied households. Karunathilaka K. (2016) studied the rural
sector. Lusardi A and Mitchell O. (2015) surveyed people in several countries. Klapper L., et.al
G (2012) used a panel dataset from Russia, an economy in which consumer loans grew at an
astounding rate.
Questionnaire happened to be the most frequently used instrument in collecting data, while focus
group discussions were used by Lyons a C and Hunt J (2003). The questions covered (1) general
personal financial knowledge (2) understanding of financial concepts and terms (3) the skill
needed to utilize knowledge and understanding and respondents experience (4) and the
demographics of the respondents in the majority of instances. Questionnaire was administered
personally by Chen and Volpe (1998). Lyons a C and L. Hunt J (2003) administered the
questionnaire as a paper version. Borden L et.al (2007) asked students to complete both a pre- and post-test survey during one of the seminars. Wagland, S. and Taylor, S., (2009) used group
administration method to distribute the survey. Hussein A. et.al. (2009) selected a convenient
sample that consisted of the UAE-national investors of Abu Dhabi Securities Market (ADSM)
and Dubai Financial Market (DFM). The Arabic version of the questionnaire was administered in
different ways: some of the questionnaires were handed to the investors who visited DFM and
ADSM trading floors. Some via the managers of brokerage companies, Abu Dhabi Chamber of
Commerce, Abu Dhabi Business Women Council and Ras Al-Khaimah Chamber of Commerce.
Mandell L and Schmid Klein L (2009) segmented the high school students by high school and
year of graduation. Half the sample took a personal financial management course while the other
half did not. The superintendent of schools wrote letters containing the web address for an online
survey and a coded identification number that could be placed at the end of the survey to qualify
respondents for a payment. Jorgensen B L and Savla J (2010) gathered data using the on-line
survey program, Survey.vt.edu. Kindle P(2010) used a survey questionnaire on
SurveyMonkey.com. And the participants were solicited by e-mails. Falahati L and Paim L
(2011) selected Malaysia university students randomly, using the list of names obtained from
each student affairs office. Bucher-Koenen T and Lusardi A (2011) have used the cross-section
of a household survey in which one randomly chosen person (not necessarily the house hold
head) who has information on household finances responds to all questions in paper and pencil
format. Almenberg J and Sa ̈ve-So ̈derbergh J (2011) have collected data via a telephone survey
of Swedish adults that was commissioned by the Swedish Financial Supervisory Authority and
