The influence of culture and financial knowledge on money decisions

The idea of ​​the homo economicus, the human being who makes rational financial decisions, has long been outdated. Behavioral economists have noted time and again that people can be quite irrational when making financial decisions, but in these behavioral statements, two aspects remain relatively underexposed: culture and financial literacy. Bart Frijns, professor of Finance at the Open University, will elaborate on these aspects in his inaugural lecture on Friday 8 April 2022 at 4 pm.

Norms and values ​​versus ratio

First of all, the importance of culture is explained. A part of culture are the norms and values ​​that a society considers important. These norms and values ​​influence the views and behavior of the people who are part of that society. Risk appetite and self-confidence, for example, are partly culturally determined. Culture thus also influences financial decisions and behaviour, such as investments, the financial policy of companies or simply the handling of money in a household. With sometimes quite ‘irrational’ decisions as a result.

Influence of culture generations later still noticeable

In his inaugural lecture, Bart Frijns gives numerous examples of the influence of culture on financial decisions, a subject on which he has been researching for more than ten years. In one of his studies in the United States, he established that this influence of culture lasts for a very long time. There he discovered the historical roots of CEOs and executives, based on surnames and databases. He found that generations later, the cultural influence of the ancestral lands was still evident in their financial decisions.

Learning to manage money: does that help?

Another cause for irrational financial decisions is financial literacy. Many people are not good with money because they do not have the knowledge and skills. Can you teach people financial literacy, and if so, how? And if people have more knowledge and skills, do they deal with money in the household differently – more sensibly? Frijns’ research pays extra attention to the self-employed. More and more people are starting their own business, even people who have little knowledge of finance. What can you do to increase the financial literacy of these freelancers? And if you teach them more knowledge and skills: do they make wiser, rational decisions?

About Bart Frijns
Prof. dr. Dr Bart Frijns (Heerlen, 1976) has been affiliated with the Open University as professor of Finance since April 2020. He obtained his doctorate in 2004 at Maastricht University. After his PhD research, he worked abroad for a longer period of time. In 2012, Bart Frijns became Professor of Finance at the Auckland University of Technology (New Zealand), where he also headed the Auckland Center for Financial Research. He has more than 75 scientific publications to his credit and has organized several scientific conferences. He is co-founder and editor of the open access journal Applied Finance Letters, editor-in-chief of the Journal of Futures Markets (Wiley) and member of the editorial board of the Global Finance Journal (Elsevier). His research interests are broad, but at the Open University his research focuses mainly on multidisciplinary themes such as financial literacy, and the role of national culture on financial behaviour. As of May 1, Bart will assume the position of dean of the Faculty of Management Sciences.

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