The Effects of Financial Education on Financial Literacy and Savings Behavior: Evidence from a Controlled Field Experiment in Dutch Primary Schools

This article reports the results of a controlled field experiment designed to estimate the short‐term effects of a 45‐minute financial education program on the financial literacy and savings behavior of children in Dutch primary schools. Among fifth and sixth graders, the program led to a pre‐ to posttest improvement in financial literacy on almost one of eight questions, with about one‐third of the increase in correctness attributable to the program. It also raised the probability of willingness to save by 4 percentage points. Nonetheless, whereas the program appears effective in respect to questions that explicitly address program content, its significant effects on financial literacy seem primarily driven by the results for girls, although we cannot reject homogeneous treatment effects with respect to gender.     

Financial literacy and its consequences: Evidence from Russia during the financial crisis

The ability of consumers to make informed financial decisions improves their ability to develop sound personal finance. This paper uses a panel data set from Russia, an economy in which household debt has grown at an astounding rate, to examine the importance of financial literacy and its effects on behavior. The paper studies both the financial and real consequences of financial illiteracy. Even though consumer borrowing increased very rapidly in Russia, only 41% of respondents demonstrate an understanding of interest compounding and only 46% can answer a simple question about inflation. Financial literacy is positively related to participation in financial markets and negatively related to the use of informal sources of borrowing. Moreover, individuals with higher financial literacy are significantly less likely to report experiencing a negative income shock during 2009 and have greater availability of unspent income and higher spending capacity. The relationship between financial literacy and availability of unspent income is higher in 2009, suggesting that financial literacy may better equip individuals to deal with macroeconomic shocks.     

Attrition bias in the Capitalia panel

The Capitalia survey of manufacturing firms in Italy represents an important source of panel data on Italian firms. Panel attrition, however, represents a potential obstacle to such use of the sample. In this paper, sample entry and exit behaviour are studied, and a test for attrition bias is carried out in order to evaluate the potential for using panels constructed from the Capitalia survey. The analysis reveals the presence of distorting panel attrition effects in simple models of firm performance. In addition, the paper discusses both the implications of attrition bias for estimates and also briefly considers possible solutions. Finally, some suggestions are made as to how to reduce the impact of attrition bias through the provision of additional information on the nature of the attrition process available to the surveying institution at the moment of data collection.     

Financial literacy and financial resilience: Evidence from around the world

We measure financial literacy using questions assessing basic knowledge of four fundamental concepts in financial decision making: knowledge of interest rates, interest compounding, inflation, and risk diversification. Worldwide, just one in three adults are financially literate—that is, they know at least three out of the four financial concepts. Women, poor adults, and lower educated respondents are more likely to suffer from gaps in financial knowledge. This is true not only in developing countries but also in countries with well-developed financial markets. Relatively low financial literacy levels exacerbate consumer and financial market risks as increasingly complex financial instruments enter the market. Credit products, many of which carry high interest rates and complex terms and conditions, are becoming more readily available. Yet only around half of adults in major emerging countries who use a credit card or borrow from a financial institution are financially literate. We discuss policies to protect borrowers against risks and encourage account holders to save.     

Saving and habit formation: evidence from Dutch panel data

This paper focuses on the role of habit formation in individual preferences. In this study, the model of Alessie and Lusardi (Econ Lett 55:103–108, 1997) and its extension by Guariglia and Rossi (Oxf Econ Pap 54:1–19, 2002) are considered. Our empirical specifications are based on their closed-form solutions, where current saving is expressed as a function of lagged saving and other regressors. In our study, we use a longitudinal data set from the Netherlands that allows us to disentangle the role of habit formation from unobserved heterogeneity. Contrary to most other studies using survey data, we find evidence in favor of habit formation. However, the magnitude of the habit formation coefficient is rather small. Income uncertainty seems to affect saving behavior of Dutch households.     

Euro depreciation and trade asymmetries between Germany and Italy versus the US: industry-level estimates

Since April 2014 to March 2015, the European Central Bank expansionary monetary policy instigates a huge depreciation of the euro in terms of dollar. According to the mainstream monetary theory, these dynamics should make the exports cheaper and at the same time make the imports more expensive. Has real depreciation of the euro helped in the improvement of European countries’ trade balances? Following the main methodologies in the recent literature, our study analyses the effects of this depreciation both for Italy and Germany towards the US. We use industry-level data at monthly frequency. The results are different from each bilateral relationship. We find that 11 industries register a long-run improvement (8 for Italy and 3 for Germany). The J-curve effect is proven just in six cases, always for Italy. The inverted J-curve effect is proven in eight cases, four for Germany, and four for Italy. These results seem to be an indirect demonstration of the structural asymmetries between German and Italian economies: German economic system is more able to be competitive with a strong currency, than Italy.     

R&D team diversity and performance in hypercompetitive environments

Research summary : This article examines the effects of an R&D team's composition on its performance outcomes in hypercompetition. The fundamental feature of firms in hypercompetitive settings is that they are constantly challenged to improve their competitiveness in a relentless race to outperform one another. Analyzing a unique data set from the Formula 1 motorsport racing industry, we find an inverse U‐shaped relationship between team diversity in task‐related experience and performance an important result that diverges from well‐established theories developed in more stable environments. Fundamentally, we show that the role of R&D team experience diversity varies depending on the size of the organizations in which R&D teams operate. While we find a moderating effect for firm age, this effect is not as robust as that of firm size. Managerial summary : This article examines the relationship between R&D team composition and performance in fast‐moving environments. Firms in these environments are constantly challenged to improve their competitiveness by outperforming one another. Analyzing a unique data set from the Formula 1 motorsport racing industry, we find that a team's diversity in job‐related experience increases its performance up to a certain extent. Once R&D teams become too diverse, performance decreases because communication and coordination become more difficult. We also show that the role of R&D team diversity varies depending on the size of the organizations in which R&D teams operate. Overall, our findings provide several novel implications for the strategy, innovation, and team literatures. Copyright © 2016 John Wiley & Sons, Ltd.     

The Value Relevance of Risk Disclosure: An Analysis of the Banking Sector

Abstract

The aim of this study is to test whether financial risk disclosures required by IFRS 7 and Pillar 3 are value relevant for investors to support them in their investment decisions. The sample in the study consists of banks listed on the London, Paris, Frankfurt, Madrid, and Milan Stock Exchanges over an 8-year period, from 2007 to 2014. Based on the aforementioned standards, we built financial risk disclosure indexes and distinguished different risk categories, qualitative and quantitative, as well as credit, liquidity, and market risk. Our analyses confirm that there is a positive association between bank value and several categories of established risk disclosures. Furthermore, it suggests that disclosure adds value to more traditional risk value measures. Besides, our results suggest that investors pay attention to the strength of the bank authority when using risk disclosures.     

Is It True Love? Altruism Versus Exchange in Time and Money Transfers

This paper investigates what motivates intergenerational inter-vivos time and money transfers. We consider a model in which transfers may be driven not only by altruism, but also by exchange considerations. We use data from the Survey of Health, Ageing and Retirement in Europe to discriminate between the two motives. We show that both if we consider money transfers from parents to children and time transfers from children to parents, the empirical evidence rejects pure altruism in favor of exchange. This result has important policy implications on the effectiveness of formal care provision as a substitute for informal care and on the impact of taxation on transfers.     

Financial literacy and stock market participation

We have devised two special modules for De Nederlandsche Bank (DNB) Household Survey to measure financial literacy and study its relationship to stock market participation. We find that the majority of respondents display basic financial knowledge and have some grasp of concepts such as interest compounding, inflation, and the time value of money. However, very few go beyond these basic concepts; many respondents do not know the difference between bonds and stocks, the relationship between bond prices and interest rates, and the basics of risk diversification. Most importantly, we find that financial literacy affects financial decision-making: Those with low literacy are much less likely to invest in stocks.