1 CHAPTER I INTRODUCTION
1.1. Background of the Study
Economic theories basically claim that purchases are made to obtain utility. In fact there are a lot of people making purchases to get satisfaction from the purchasing process instead of obtaining utility. Dittmar (2005) argued that these kind of people make purchases to improve their mood as well as to increase their confidence, while DeSarbo & Edwards (1996) stated that these people make purchases to escape from stress and anxiety. These people are called compulsive buyers by O’Guinn dan Faber (1989). The behavior shown by compulsive buyers in the study of consumer behavior is called compulsive buying behavior (CBB). The process of buying is considered as pleasurable action to compulsive buyers that they are often labeled as the hedonists.
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The emergence of this behavior is caused by some internal factors, supported by various external factors. Guo & Cai (2011) in their investigation found that pocket money is a common factor that predict CBB across nations, where people with higher pocket money are more likely to do CBB. Another external determinant of CBB according to Moschis et al. (2013) is the influence of peers. People who are not accepted by their peers or having low peer acceptance are less likely to do CBB than those accepted (high peer acceptance). In addition to both external factors explained above, money retention is also proved as another determinant of CBB. People who are not careful in using their money are more likely to do CBB (Li et al., 2009).
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money they borrow from their friends for more than twice then it probably will break their friendship.
It is also possible that borrowing habit itself can be affected by pocket money, peer acceptance, and money retention. People with higher pocket money may borrow money more often because they believe that they have the ability to pay back, vice versa. In case of peer acceptance, people who feel accepted by their peers will have greater chance to borrow money from their peers. If it is linked to money retention, it isn’t hard to imagine that people who are carefully using their money will rarely borrow money. The reason is because they are good in managing their money to make it enough for them or in case that they need a little extra money, they will try to find another way to get it instead of borrowing.
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At least there are two reasons for performing this study. The first reason is that generally previous studies focus only in the field of marketing by using marketing variables as the independent variables. Therefore there are still limited studies carried out in the field of finance by framing CBB using financial variables as the independent or dependent variables. The second reason is previous studies only investigate the effect of several independent variables on CBB, have unable to establish a connection between CBB and its impacts.
1.2. Research Problems
1. Do pocket money, peer acceptance, and money retention have significant effect on CBB?
2. Do pocket money, peer acceptance, and money retention have direct significant effect on borrowing habit?
5 1.3. Purpose of the Study
1. To analyze the effect of pocket money, peer acceptance, and money retention on CBB.
2. To analyze the direct effect of pocket money, peer acceptance, and money retention on borrowing habit.
3. To analyze the mediating role of CBB on the effect of pocket money, peer acceptance, and money retention on borrowing habit.
1.4. Significance of the Study
1. The result of this study is expected to help people having better understanding about borrowing habit, either its direct of indirect contributing factors which haven’t been examined by previous studies.
