Karachi, January 09, 2023 (PPI-OT):IBA faculty authored a paper analysing Investor’s Intrinsic Motives and the Valence of Word-of-Mouth in Sequential Decision-Making
Dr. Fawad Ahmad, Assistant Professor, Department of Finance, School of Business Studies (SBS), authored a research paper titled ‘Investor’s Intrinsic Motives and the Valence of Word-of-Mouth in Sequential Decision-Making: Modelling of Triple Serial Mediation’, published in the Journal of Behavioural Finance.
Abstract
Word-of-Mouth (WoM) is a socially embedded process, and investors engage in social considerations to achieve self-motives. Investors attempt to share negative WoM (NWoM) to emotionally connect (self-affirm) to strengthen existing social ties following prior losses.
In contrast, investors attempt to share positive WoM (PWoM) to self-enhance to attract others into developing new social ties. Thereby, this study aims to predict the impact of prior losses or gains on investors’ later decisions by engaging in the valence of WoM to achieve different underlying self-motives and social-motives.
This study used experimental data and employed PROCESS tool model 6 to check the validity of the proposed triple serial mediation model. Findings support the viability of the triple mediation model that investors seek to achieve different underlying self-motives and social-motives manifested in PWoM or NWoM, following prior gains or losses.
Investors seek to self-affirm by strengthening components of social-motives through engaging in NWoM, following prior losses. While investors seek to self-enhance to develop components of social-motives through sharing PWoM, following prior gains. Findings provide significant implications for researchers, managers, financial advisors, and analysts.
Researchers, managers, and analysts can incorporate investors’ intrinsic factors in traditional economic models to better predict investors’ economic behaviour. Financial advisors need to understand self-motives and social-motives that change clients’ risk attitude and frame investment advice to achieve particular clients’ self-motives and social-motives.
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