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Islamic Banking, Accounting And Finance International Conference - The 9
thiBAF 2020
Spiritual Intelligence and Financial Experience On Personal Investment Muslim Scholar
Putri Reno Kemala Sari, M.A
1and Nova Adhitya Ananda, M.M
2, Nuwailah
31 Sumbawa University of Technology, Indonesia, [email protected]; 2 Sumbawa University of Technology, Indonesia, [email protected]; 3 Sumbawa University of Technology, Indonesia,
Abstract
Nowadays, there are so many things that affect investors in making decisions, as obtained through experience or the intelligence.
When these two things combine, it can form a different action for each investor. The aims of this study are to find out the effect of spiritual intelligence and financial experience on investment decision among Muslim scholars in Sumbawa University of Technology. Sumbawa University of Technology is located in West Nusa Tenggara, a province with Muslim-majority population that known for the strong nuances of Islam. Data were collected by using questionnaire method from the respondents that become sample in this research. There are 62 scholars selected as respondents using the Slovin formula with an error margin of 10%. To test hypotheses, this study employs multiple regression analysis. Moreover, by performing multiple regression analysis, the findings shown that only financial experience has an effect on personal investment decision, but spiritual intelligence does not.
JEL Classification: G11,G0,G4
Keywords: Spiritual Intelligence, Financial Experience, Muslim
I. INTRODUCTION 1.1. Background
Many individuals find choices in their daily activities and put their self in decision making. These decisions have an impact to the main purpose, directly or indirectly. In this era of technological and knowledge advancements, financial decision is one of the hardest decision to make. It is reasonable for the corporation. Financial decisions, especially investments, are the most difficult decisions taken for corporation management because it will affect its value (Vranakis & Chatzoglou, 2011).
Besides, discussions about this topic also become a scourge for each individual in managing their personal finance.
From Scipioni (2019), based on the results of a survey conducted by GoBankingRates.com, 68 percent of millennials (aged 23-38 years) stated that they agreed or strongly agreed about the difficulty of financial problems they had to face compared to the previous generation. It taught individuals to be more financially aware, so the individuals can reduce financial problems and be wiser in making decisions.
Decision making in personal finance is chosen based on various reason. Hilgret and Jeanne observe that an ideal financial decisions are needed to increase income, manage expenses and pay taxes so that family financial management gets better (Yulianti & Silvy, 2013). Preparation of education funds, burden of living expenses, even daily needs will be very risky if it is decided without careful reason.
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Financial decisions are divided into several focuses, one of which is investment decision. According to Setiawan et al. (2016) investment is one of the important requirements in capital and economic growth in a country's society consisting of the behavior, perceptions, and intentions of individuals or institutions in placing their deposits in selected financial assets. Investment decision is a decision to invest capital in an asset, with the hope of earning profits in the future.
Individuals’ income can be optimized as well as possible through investments like investing in stock or gold.
According to Rodgers & McFarlin (2017) there are various types of investments that can be chosen, such as complete investment and accounting, portfolio investment or savings certificates, domestic investment or international investment, and personal needs such as home investment, agricultural investment, or senior investment.
Making investment decisions can have a big impact in determining the motion and direction of steps an individual will take. For example, if an individual decides to send his child to university, he must also prepare sufficient education funds. These individuals are no longer free to behave impulsively because they have to follow the investment decisions that have been made. Rodgers & McFarlin (2017) state that improper investment decisions can cause an individual to have legal, financial, and even personal problems. Therefore, investment objectives must be measurable and based on logical estimates of financial allocations. Individuals who have made investment decisions, of course, have previously designed a financial plan and can map their personal financial allocations, which will create certain financial results.
Based on previous studies, there are several variables that affects an individual' investment decisions. In this study, the first variable is spiritual intelligence. Spiritual intelligence is the intelligence that an individual has related to the meaning of life that affects the resulting behavior. Zohar & Marshall (2007) mention that spiritual intelligence is the intelligence to face and solve problems of meaning and value, and is the intelligence to place our behavior and life in the context of a broader and richer meaning.
Some studies reveal the effect of one's intelligence in decision making. Stupar et al. (2014), for example, examined 34 managers in different fields of industry. The research explains that spiritual intelligence affects the performance of decision making, which is indicated through answers from respondents. The answers show that the respondents proved the importance of spiritual intelligence for successful decision making. Ikhtiarini & Indrawati (2017) also state that someone who has high spiritual intelligence is able to have a positive point of view when making decisions, so that the decisions taken by these individuals are pure without coercion and in a conscious state. In addition, according to Arjianto, one of the factors that affect personal financial management is spiritual intelligence (Sina & Noya, 2012). Similar to what was stated by Parmitasari et al. (2018) who found that spiritual intelligence had a partial effect on personal financial management.
The second variable that affects individual investment decisions in this study is financial experience. Sina (2012), stated that experience can improve financial management and decision making. It could be learned from personal experiences, friends, family, or others who are more experienced. Sohn et al. (2012) identifies that experiences in childhood can be more important because financial incidents in the family occur simultaneously with consumer socialization, so that financial experience at a young age can be a key that leads to behavior as an adult. Financial experience could also be obtained through the work environment, literacy, and others.
In addition to learning resources, the experience is one of the bases that is often used as a guide in decision making.
Experience is very useful for practical knowledge and can help in analyzing the background of a problem. Someone who has experience tends to better understand the tasks at a job and do them well. This can be seen in the social life of the community where in organizations and even in the world of work, experience is an important element in the assessment standard. The experience has more value in practice, therefore people who have a lot of experience will be judged to be superior in addressing problems and being careful in making decisions.
Financial experience is an important factor in investment decision making. According to Pritazahara & Sriwidodo (2015), financial experience is the basis in investment decision making because financial experience is not just about having an investment product, but also in utilizing the investment product itself.
Based on the explanation above, the writer is interested in knowing how an individual makes investment decisions with their spiritual intelligence and financial experience, which in this case will be examined by the Muslim scholars especially at the Sumbawa University of Technology. Sumbawa University of Technology is a university located in
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West Nusa Tenggara, one of the provinces in Indonesia which is famous for its strong Islamic nuances. The university routinely holds Spiritual Capacity Building Activities as a spiritual program for the academic community.
Besides, the scholars come from different scientific backgrounds and regional origins so that they are quite heterogeneous both in terms of mindset and experience. Therefore this study entitled "Spiritual Intelligence and Financial Experience on Personal Investment Muslim Scholar”.
1.2. Objective
The objectives of this study are twofold; (i) to determine the effect of spiritual intelligence on investment decisions for Muslim scholars, and (ii) to determine the effect of financial experience on investment decisions for Muslim scholars in Sumbawa University of Technology.
II. LITERATURE REVIEW 2.1. Background Theory 2.1.1. Spiritual Intelligence
Covey (2013) explains that spiritual intelligence is the basic ability of all existing intelligence. This intelligence develops from a person who is reflected in the form of knowledge and appreciation and understanding in oneself, then produces social behavior. Zohar & Marshall (2007) define spiritual intelligence as intelligence to deal with and solve problems of meaning and value, to place behavior and life accordingly, and intelligence to judge that one's actions and ways of life become more meaningful. Spiritual intelligence also plays a role in bridging the mind and emotions, and the mind and body. Meanwhile, Wigglesworth (2012), describes spiritual intelligence as the ability to be wise and patient, maintain inner and outer balance, and use that ability to live and survive in various situations.
Buzan (2002) explains that spiritual intelligence is related to how an individual grows and develops. This intelligence develops naturally from personal intelligence which is reflected in the form of knowledge and appreciation and understanding of oneself. Therefore, the first principle in spiritual intelligence is self-awareness and appreciation, which is then continued through social intelligence in the form of knowledge and appreciation and understanding for others. After going through the development of personal intelligence and social intelligence, in the end, individuals will be able to understand and appreciate aspects of the universe. Even the intensity, understanding, and appreciation of the environment are important aspects of developing individual spiritual intelligence.
According to Amram & Dryer (2008), there are 5 indicators in spiritual intelligence, namely: 1) Consciousness; 2) Grace; 3) Meaning; 4) Transcendence; and 5) Truth.
2.1.2. Financial Experience
Widger & Crosby (2014) state that psychologically, humans will predict the likelihood of an event based on things that are easy to remember when making decisions. That is why experience is often used as the basis for decision making in various cases. Widger made a classification of successful investment companies and one of them stated that the company's investment management officials also learned a lot from experience and made it a foundation in their movement.
A psychologist in the clinical field, Arlow (1991) states that in psychoanalytic theory, individual experiences can produce thoughts, feelings, and impulses in a phenomenon. This means the experience possessed by each individual will affect the thinking and behavior of individuals in dealing with phenomena. Schmitt (2010) in his book also states that apart from intelligence and knowledge, the experience can also produce different sensory perceptions, feelings, and actions for each individual.
Financial experience is an occasion that has ever been passed by an individual that affects the mindset and response related to finance. According to Sina (2012), financial experience is the ability to consider or make investment decisions to determine the current and future use of financial management. Financial experience can be obtained
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from events that happen to oneself and others, such as family financial incidents, social circles, even from other people's stories about their finances.
According to Lusardi & Tufano (2008), financial experience is a learning medium for individuals that can be obtained through individual experiences related to investment, utilizing investment products, and others.
Furthermore, Sina (2012), explains that experience can improve financial management and decision making and can be learned from personal experiences, friends, family, or others who are more experienced.
The indicators in financial experience: 1) Having carried out investment activities; 2) Having owned and utilizing investment products; 3) Having carried out financial planning; 4) Family financial culture; and 5) Experience in having debt.
2.1.3. Investment Decision
Investment decision is a decision regarding the composition of assets owned and investment choices in the future (Wijaya & Wibawa, 2010). Investment is an activity to invest capital for future profits. According to Tandelilin (2001), investment is the commitment of an amount of money or other resources that is carried out now (present time) in the hope of obtaining benefits in the future. According to Rodgers & McFarlin (2017), there are various types of investment that individuals can choose, such as stocks, bonds, certificates of deposit, domestic and foreign investment, as well as personal needs such as home investment, educational investment, or pension investment.
Meanwhile, those who invest are known as investors, which consist of two groups; individual investors and institutional investors.
Tandelilin in Marsis (2013) stated that investment decision indicators are return, risk, and time value. According to Tandelilin (2001), when investing, the time factor is an influential component because it can affect investor behavior towards their investment. There are three alternative timeframes for investing, namely the short, medium and long term. The investment period chosen also affects the investment risk that is likely to occur. In addition, the time factor can also consider the fast and slow return on investment. The faster the returns, the more feasible the investment is.
III. METHODOLOGY
This study uses quantitative research methods that explain the effects of spiritual intelligence and financial experience on individual investment decisions. Sugiyono (2011) explains that quantitative research methods are defined as research methods used to examine specific populations or samples, data collection using research instruments, statistical quantitative data analysis, which aims to test predetermined hypotheses. This research is a type of associative research which is research to determine the relationship or influence between two or more variables (Abdullah, 2015). Associative research is divided into two objectives, namely correlational research and causal research. The purpose of this study is to determine the effect between variables, so it is called causal research.
The target population of this study was the Muslim scholar at Sumbawa University of Technology. According to the Human Resource Department data, 166 lecturers are officially registered and 62 people are selected as respondents using the Slovin formula with an error margin of 10%. The formula is used to determine how much sample size is needed by knowing the entire population through this following formula:
(1)
The sampling technique used was Purposive Sampling. According to Abdullah (2015), Purposive Sampling is a sampling technique that is based on certain objectives with several considerations. The criterion used as
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consideration is the sample is the Muslim scholars at Sumbawa University of Technology.
3.1. Method
To ensure validity and reliability of the data that was collected, the questionnaires were pre-tested by researcher to establish their validity and reliability before they were administered to the respondents.
1. Validity Test
A good instrument is a valid one in measuring what is being measured, in other words accuracy is important. The validity test scale uses product moment using SPSS. An item is declared valid if value is greater than (Machali, 2017). The validity test of this study used 31 samples with a significance level of 10%. The result of the degrees of freedom is 29 using the formula df = N-2 and α = 0.05, so that the value of is 0.355.The results of the validity test obtained show items in the valid questionnaire because value is greater than .
2. Reliability Test
Reliability test is used to measure repeatedly produce the same data, or also called consistently. Reliability test usually uses Cronbanch’s Alpha and can be said to be reliable if the alpha coefficient is greater than 0.7.
Table 2.
Reliability Test Criteria
Cronbanch’s Alpha Value Category
≥ 0,900 Excellent
0,800—0,899 Good
0,700—0,799 Acceptable
0,600—0,699 Questionable
0,500—0,599 Poor
< 0,500 Unacceptable
Source: Machali, 2017
The reliability test results of this study showed that all items said to be acceptable reliable since the Cronbanch’s Alpha value of the variables are greater than 0.70.
After the data had been collected and pre-tested, researcher conducted data processing using SPSS. The researcher used Multiple Regression Analysis whereby the variables of the interest here were spiritual intelligence and financial experience which was the independent variable and personal investment decisions the dependent variable.
In Machali (2017), it is explained that multiple regression analysis is one of the inferential statistical methods used to measure the influence of two or more variables. This test consisted of the classical assumption test including normality test, multicollinearity test and heteroscedasticity test and the individual t-test to test the hypothesis.
IV. RESULTS AND DISCUSSION
a. The Effect of Spiritual Intelligence on Individual Investment Decisions
According to Zohar and Marshall (2007), spiritual intelligence is a form of intelligence to deal with and solve
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problems of meaning and value, to place behavior and life accordingly, and intelligence to judge that one's actions and way of life become more meaningful.
The findings shows that spiritual intelligence has no effect on the personal investment decisions of Muslim scholars.
This is not same with what was mentioned by Arjianto (in Sina & Noya (2012) and Parmitasari et al. (2018), which explains that one of the factors that influence personal financial management is spiritual intelligence. But this results are also in accordance with some previous researchers that under certain conditions, spiritual intelligence requires other factors to be able to influence other variables. As explained by Karvof (2010), that spiritual intelligence is absolutely needed in managing finances by requiring other factors in optimizing it.
This spiritual intelligence variable uses five indicators, namely awareness, grace, meaning, transcendence, and truth.
After examining these indicators, the five of them showed the average of the indicators achieved based on the results of the questionnaire and got good scores. In accordance with the average results obtained, the indicator with the highest score is achieved by grace. This can be interpreted that Muslim scholars are individuals who are always grateful, grateful, and instill joy in their lives. Besides that, Muslim scholars in Sumbawa University of Technology have an average spiritual intelligence that is quite high but it does not affect the investment decisions made. This can be explained by Pradiansyah (2007), who divides three generations of spirituality in the workplace. The first generation is often called the generation of pre-spirituality, namely the generation who adheres to the understanding that business is solely for profit and must be kept away from spirituality.
Then the second generation is the first generation of spirituality. This generation can present the spirituality in the workplace but it is only a symbol and cannot be united. The third generation is the generation that fully understands and brings spirituality into the work environment. Not only present, this generation also applies the values of spirituality in its business so that it can give a deep meaning to the work.
If related to Pradiansyah' explanation above, the Muslim scholars can be categorized as the second generation where the individuals already have an awareness of spirituality but still separate it from the scope of work. As example, Sumbawa University of Technology has regular monthly spiritual capacity building activities, prayer room, and other spiritual environment but these do not affect the business and work activities of each individual. Therefore, even though it has a spirituality intelligence that tends to be high, it does not affect the Muslim scholars personally in making individual investment decisions.
b. The Effect of Financial Experience on Individual Investment Decisions
Sina (2012) explains that financial experience is an ability that is possessed through things that have been passed to consider or make investment decisions to find out the usefulness of financial management at present and in the future.
The findings shows that financial experience has an effect on personal investment decisions. These results are in line with those stated by Pritazahara & Sriwidodo (2015) that financial experience is one of the basics of investment decision making. Yulistia & Iramani (2018) also explained that someone who has good financial experience has the confidence to be able to solve daily financial problems and encourage these individuals to do good financial management as well.
In addition, these results are also consistent with research conducted by Susdiani, (2017), which explains that financial experience has an influence on the behavior of PNS investment planning in Padang. While the research by Yulianti & Silvy (2013) also suggests that there is an influence between financial experience on investment planning behavior.
The financial experience variable has five indicators that each of which has an intermediate score. The indicator with the highest score is achieved by experience in having debt. It means that the Muslim scholars has a variety of
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experiences related to debt. From each indicator used in this study, it shows the influence of financial experience possessed by Muslim scholars on investment decisions. This shows that the things that have been passed by individuals related to finance can give effect to the individual in making their personal investment decisions.
c. Making Investment Decisions For Muslim Scholars
There are three indicators of investment decision making in this study, namely return, risk, and time factor. Of the three indicators, the risk indicator or risk level has the highest value among the others. This can be seen from the results of the questionnaire obtained.
Table 7.
Average Value of Investment Decision Indicators Variable Indicators Average
Value
Investment Decision
Return 2,87
Risk 3,06
Time Factor 2,83
The results show the calculation results of the questionnaire which shows the risk indicator as the indicator with the highest value. The risk position that occupies the top position means that the Muslim scholars make good investment decisions based on considerations of the risks that will be obtained. Meanwhile, the other two indicators have a slight difference and the time factor indicator has the lowest value. The time factor indicator which has the lowest value means that Muslim scholars do not consider time in investing and are more focused on future risks other than time-related risks. It can be in the form of default risk, bankruptcy risk, and other types of risk that are not related to time.
V. CONCLUSION AND RECOMMENDATION 5.1. Conclusion
Based on research on spiritual intelligence and financial experience on individual investment decisions of Muslim scholars, the following conclusions can be drawn:
1. The findings shows that spiritual intelligence has no effect on individual investment decisions. Therefore, the level of spiritual intelligence possessed by Muslim scholars does not have any effect in investment decision making and the scholars can be categorized as the second generation where the individuals already have an awareness of spirituality but still separate it from the scope of work.
2. The findings shows that financial experience affects the individual investment decisions. Therefore, the better and richer one's experience in finance, the better the investment decisions made.
5.2. Recommendation
1. For the researcher to prepare themselves better in managing the time and energy to carry out research so that the results obtained are more optimal.
2. For the next researchers, to deepen the theories related to this research even across other branches of science (for example psychology, sociology, or anthropology) so as not to be confused with terms and explanations from different fields of science. In addition, it would be better to look for case studies other than at Sumbawa
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University of Technology and add or use variations of other variables that are more interesting such as financial literacy, experienced regret, risk tolerance, overconfidence, or risk perception.
3. For individuals who want to invest, to consider carefully before deciding their investments from various points of view and from aspects of yourself that can affect investment (psychological factors).
4. For Muslim scholars as reference material about spiritual intelligence and financial experience and its relation to investment decisions.
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