The effect of financial literacy on investment decision making by pension fund managers in Kenya
Abstract
This study assesses the financial literacy of the pension fund managers who invest in the
pension’s scheme funds in local financial markets. In addition, it examines the relationship
between financial literacy and the influence of the factors that affect the investment decision.
The objective of the study is to establish the effect of financial literacy on investment decision
making by pension fund managers. A modified likert scale questionnaire has been developed
divided into three parts. The first part covers demographic variables. The second part identifies
several financial literacy factors affecting the investment decision by pension fund managers in
Kenya. The third part is devoted to factors of behavioral finance. A target population of all 16
fund managers in Kenya was used. The results indicated that the financial literacy of the is far
from the needed level. The financial literacy level was found have a significant effect on
investment decision making by fund managers.
Since these decisions are ongoing, requiring members to periodically monitor and evaluate the
performance of their chosen fund and investment option, and decide whether to switch to another
fund and/or investment option. To achieve optimal outcomes in this complex decision-making
environment requires decision-makers to have adequate levels of financial knowledge and skills.
The call for enhanced financial literacy amongst consumers is a global phenomenon, driven by
the growing complexity of financial markets and products, and government concerns about the
affordability of supporting an ageing population.
Citation
MBAPublisher
School of Business