The impact of culture and financial knowledge on monetary decisions

The idea of ​​human-born Homo Economics making rational financial decisions is long overdue. Behavioral economists have repeatedly stated that people may be more irrational when making financial decisions, but in these behavioral statements, two aspects are relatively limited: culture and financial literacy. Bart Fridges, Professor of Finance at the Open University, will elaborate on these features in his inaugural lecture on Friday, April 8, 2022 at 4 p.m.

Terms and values ​​and ratio

First, the importance of culture is explained. Morals and values ​​that a community considers important are part of the culture. These rules and values ​​affect the views and behavior of the people who are a part of that community. Risk hunger and self-confidence, for example, are somewhat culturally determined. It also influences financial decisions and behavior, such as culture, investments, corporate finance policy or handling money at home. The result is sometimes very ‘irrational’ results.

The impact of culture from generation to generation is even more noticeable

In his inaugural lecture, Bart Fridges gives many examples of the influence of culture on financial decisions, in which he has been researching for more than ten years. In his study in the United States, he established that this influence of culture can last for a very long time. There he traced the historical roots of CEOs and executives based on family names and databases. Generations later, he found that the cultural influence of ancestral lands was still evident in their financial decisions.

Learning to Manage Money: Does It Help?

Another reason for irrational financial decisions is financial illiteracy. Many people are not good at money because of lack of knowledge and skills. Can financial literacy be taught to people, and if so, how? If people were more knowledgeable and talented, would they handle money at home differently – more intelligently? Frijns’ research focuses more on the self-employed. More and more people are starting their own business, even those who have no understanding of finance. What can you do to increase your financial knowledge of these freelancers? If you teach them more knowledge and skills: Do they make intelligent, rational decisions?

About Bart Frains
Professor Dr. Dr. Bart Friggs (Heerlen, 1976) has been with the Open University as Professor of Finance since April 2020. He received his doctorate in 2004 from the University of Maastricht. After his PhD research, he worked abroad for a long time. In 2012, Bart Fridges became Professor of Finance at the Auckland University of Technology (New Zealand), where he also headed the Auckland Financial Research Center. He has more than 75 scientific publications and has organized numerous scientific conferences. He is the co-founder and editor of the open access magazine Applied Finance Letters, editor-in-chief of the Journal of Futures Markets (Wiley) and a member of the editorial board of the Global Finance Journal (El Xavier). His research interests are broad, but his research at the Open University focuses primarily on diverse themes such as the role of national culture in financial literacy and financial behavior. From May 1, he will accept the post of Dean of the Faculty of Part Management Science.

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