Factors Affecting Investment Awareness: Case Study on Productive Age in Surabaya City
Doni Achmad Heniawan1*, Andrieta Shintia Dewi1
1 Prodi S1 MBTI, Fakultas Ekonomi dan Bisnis, Universitas Telkom, Bandung, Indonesia
*Corresponding Author: [email protected]
Accepted: 15 July 2021 | Published: 1 August 2021
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Abstract: Indonesia is one of a country that has one of the most tremendous human resources quantity. That advantages could lead whether a good or bad effect depending on the quality of the society, one of the things that could be in determining that quality is the rate of investment awareness. In fact, that there’s still many people who do not understand the difference between investment and savings in which being the evidence of how low the rate of financial literacy.
Besides that, things that related to financial product are really influenced by emotion on each individual which make the difference on how they did their investment activity. Environment as an external factor could influence the decision making for financial activity on each individual. The rate of financial literacy, Personal interest, and environmental factor together could affect on how the rate of investment awareness in certain society. This research purpose is to see the influence of financial literacy, Personal Interest, and Environmental factor against investment awareness at productive age in one of the biggest city in Indonesia, namely Surabaya. The phenomenon on this research is being done with causal research method. Data gathering technique is being done with distributing questionnaire to 400 respondents with primary data collecting method. The targeted respondents are productive age in Surabaya city.
This research is using quantitative method with multiple linier regression analysis to examine the factors that could affect the rate of investment awareness at productive age.
Keywords: Financial Literacy, Personal Interest, Environmental Factor, Investment awareness, Productive age
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1. Introduction
The population in Indonesia still occupies the fourth position as the country with the largest population in the world. Based on age group, the population of productive age (15-64 years) reached 68.7% of the total population. Meanwhile, 31.2% were of unproductive age (0-14 years) and (above 65 years). So that the dependency rate of the Indonesian population is 45%
and is in the era of the demographic bonus, when the number of productive age population is greater than the number of unproductive populations. The condition of this demographic bonus can have both good and bad impacts on the Indonesian economy. The demographic bonus can bring benefits if the productive age population (15-64 years) is in a good quality, otherwise this condition can be a threat if the productive age population does not have sufficient knowledge and skills in the industrial 4.0 era in the future. One of a way to see how underutilized the potential of this demographic bonus is seeing about how low the level of investment awareness.
based on data from the Indonesian Central Securities Depository (KSEI), out of 64.3 million people belonging to the 16 – 30 years age group, only 1.6 million people have investments in the Indonesian capital market (both stocks and equity mutual funds). Investment awareness can
be interpreted broadly as familiarizing oneself with the investment environment and understanding the products of the financial market, specifically the rewards and risks involved in making the best choice (Acquah-Sam and Salami,2013).
One of the areas with the largest population in Indonesia and the largest in East Java Province is the city of Surabaya. East Java Province itself has a literacy index and inclusion index that increased in 2019 at 48.95% and 87.96% compared to 2016 figures of 35.6% and 73.2% for East Java Province. However, from these results, there is still a considerable difference between the value of financial literacy and financial inclusion. In general, there are quite a lot of people who already have access to finance but are not equipped with adequate financial understanding.
In addition to financial literacy, personal interest is a factor that can be a driving force for someone to carry out certain activities in investing (Juliza et.al,2017). personal interest or interest in investing plays a significant role in the overall financial management behavior awareness of individuals (Putra et. Al. 2016).
Environmental factors are external factors that can influence a person in carrying out investment activities (Shah, 2016). The existence of an appropriate monetary policy will provide direction and influence on investment institutions in regulating potential investor demand. Appropriate monetary policy as an external factor here will support the occurrence of acute inflationary suppression, so that it will maintain the purchasing ability of individuals on investment (Prasana, 2012). In addition, family activities and standard of living are choices why an individual will be more likely to buy financial instruments that have long-term returns (Kasilingan and Jayapal, 2010).
Looking at the existing phenomena, the researcher wants to find out what factors influence Investment Awareness in Productive Age, which specifically the objectives of this research are:
1) To find out the relationship between financial literacy and investment awareness 2) To examine the effect of personal interest on investment awareness
3) To find out whether there is an influence of environmental factors on investment awareness
4) To analyze whether financial literacy, personal interest, and environmental factors simultaneously affect investment awareness.
2. Literature Review
2.1 Awareness on Investment
Consciousness is an influential subject with differences in self and emotions. When conducting investment activities, investors usually tolerate sacrificing present value for uncertain future rewards. This can include making many decisions, such as what type of instrument to invest in, the mix of instruments, the amount of investment, timing considerations, and so on (Philip, 2005). Variables such as awareness, income level, and skills play a major role that can influence the younger generation to invest in certain financial instruments (Alex wang,2011).
2.2 Financial Literacy on investment awareness
Financial literacy is the ability to understand, analyze and manage finances to make the right financial decisions to avoid financial problems. Financial literacy is a measure of the degree to which a person understands key financial concepts, has the ability and confidence to manage personal finances through short-term and sound decision-making, long-term financial
planning, while paying attention to life events and changing economic conditions (Azizah et al, 2013).
2.3 Personal Interest on investment activities
Personal interest or self-interest is a person's liking for a particular object from an event or object. Personal interest or personal interest is a factor that can be a driving force for someone to carry out certain activities in investing (Putra et al, 2016).
2.4 Environmental factors towards investment awareness
This factor plays an important role in determining investment awareness. The influence of environmental factors on investors needs to be considered, because in making investment decisions, investors often involve more than one individual (Julizah et al, 2017). Environmental factors such as problems or family affairs and standard of living can determine how to respond to financial management (Kasilingam and Jayapal, 2010).
2.5 Research Framework
This study aims to determine whether the independent variables, namely Financial Literacy, Personal Interest, and Environmental Factors have an influence on the dependent variable, namely Investment Awareness. Therefore, based on the existing objectives, it can be visualized in the following framework:
Figure 1: Research Framework
2.6 Research Hypothesis
Within the objective to find out relationship between financial literacy, personal interest, and environmental factors towards investment awareness, the following hypothesis are
formulated:
H1: Financial Literacy has an influence on investment awareness.
H2: Personal Interest has an influence on investment awareness.
H3: Environmental factors have an influence on investment awareness.
H4: Financial literacy, personal interest, and environmental factors simultaneously have an influence on investment awareness.
3. Methodology
Respondents in this research were people of productive age (aged 15 to 64 years) in the city of Surabaya as many as 400 respondents. The sampling technique used is simple random sampling, to determine the number of samples using the Slovin formula with error level as much as 5%. In this study, the authors used questionnaires and observation as data collection methods. The data is being analyzed using SPSS 25
3.1 Data analysis Technique 3.1.1 Multiple Linear Regression
Multiple linear analysis is a form of regression where there is one dependent variable and two or more independent variables (Sugiyono, 2017). Multiple linear regression analysis was used to determine the relationship between the independent variable and the dependent variable simultaneously.
3.1.2 Coefficient of Determination
The coefficient of determination is carried out to measure how much influence the independent variable has on the dependent variable, where the coefficient of determination is between zero and one. If the coefficient of determination is small, then the influence of the independent variable on the dependent variable is weak. If the value of the coefficient of determination is close to one, then the influence of the independent variable on the dependent variable is strong (Ghozali, 2018).
3.1.3 Hypothesis testing using Simultaneous Significant Test (F Test)
The F test was conducted to show the joint or simultaneous effect of the independent variables on the dependent variable included in the model (Ghozali, 2018). The criteria used in testing the hypothesis is to compare the value of t or Fcount with t or Ftable using the critical value of Ttable and Ftable with a predetermined significant level of 5% level.
3.1.4 Hypothesis testing using Partial Significance Test (T Test)
Partial significant testing was conducted to determine how far the influence of the independent variables individually on the dependent variable. This effect can be detected by looking at the coefficient table of the regression coefficients and the relationship between the variables tested (Ghozali, 2018). Significance value used in this study is 5%.
4. Discussion and Conclusion
4.1 Discussion
Respondents in this study were people of productive age (aged 15 to 64 years) in the city of Surabaya as many as 400 respondents. The majority of research respondents aged 19-23 years with a percentage of 44%. Based on gender, women dominate the total number of respondents with a percentage of 63% or as many as 250 respondents, on the other hand with a percentage of 37% or as many as 150 respondents occupied by male sex. Furthermore, on the characteristics of the last education, the majority of respondents last educated as a Bachelor, both S1/S2/S3 with a percentage of 47%. Based on marital status, the majority of respondents are unmarried with a percentage of 56%.
Table 1: Multiple Linear Regression
Unstandardized B
(Constant) 5463,722 Financial Literacy 0,178
Personal Interest 0,294 Environmental Factors 0,180
From table 1, the formula for linear regression equation is = 5463,722 + 0.178𝑋1 + 0.294𝑋2 + 0.180𝑋3. Where each independent variable has a positive regression value, namely 0.178 on Financial Literacy (X1), 0.294 on Personal Interest and 0.180 on Environmental Factors. This indicates that there is a positive relationship between each independent variable on Investment Awareness.
Table 2: Coefficient of Determination
Model R R
Square
Adjusted R Square
Std. Error of the Estimate
1 0.530a 0.281 0.275 2252.41060
a. Predictors (constant), Financial Literacy, Personal Interest, Environmental Factors b. Dependent Variable: Investment awareness
Based on table 2, it is found that the R value is 0.530 and the R2 value is 0.281 or 28.1%. This shows that the value of the determinant coefficient is 28.1%, which means that Financial Literacy, Personal Interest, and Environmental Factors have an influence of 28.1% on Investment Awareness. While 71.9% is influenced by other variables outside the regression model of this study.
Table 3: Simultaneous Significant Test (F Test)
Anovaa Model Sum of
Squares
df Mean Square
F Sig
Reggression 783782463 3 261260821 51.497 0,000b
a. Dependent variable: Investment awareness
b. Predictors: (constant), Financial Literacy, Personal Interest, Environmental Factors
Based on table 2 shows that the Fcount is 51.497 then compared with the Ftable value (2.62). So that. It can be concluded that because Fcount > Ftable, H0 is rejected and H1 is accepted, which means that there is a simultaneous influence between Financial Literacy, Personal Interest, and Environmental Factors on the Investment Awareness variable.
Table 4: Partial Significance Test (T Test)
coefficient
Model t Sig
(Constant) 4.212 0.000 Financial Literacy 3.337 0.001 Personal Interest 4.971 0.000 Environmental Factors 2.702 0.007
Based on Table 3 it can be concluded that all the independent variable has a tcount > ttable value, with each value are (3.337;4.971;2.702) > 1.966. Beside that all of the independent significance value also lesser than 0,05. It indicates that there is a partial influence on each independent
variable (Financial Literacy, Personal Interest, and Environmental Factors) towards Investment awareness.
4.2 Conclusion
Referring to the result of data calculation and analysis process that had been done, it can be concluded that each of independent variables Financial Literacy, Personal Interest, and Environmental Factors has a significant influence towards investment awareness. Besides that, all of independent variables also simultaneously have a significant influence towards investment awareness. However, based on the analysis, those three independent variables only had influence towards investment awareness as much as 28,1%, while the rest is influenced by other variables outside the regression model of this study. Those other variables could be such as lifestyle, geographical conditions, and conformity behavior due to a trend.
As an advice knowing that the object of this research is the productive age of the city of Surabaya, if there is a similar research conducted after this, it is hoped that the research will consider choosing a more specific object related to investment such as the investor community.
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