Title: Young adults' financial literacy and overconfidence bias in debt markets

Authors: Andrzej Cwynar; Wiktor Cwynar; Wiktor Patena; Welcome Sibanda

Addresses: University of Economics and Innovation, Projektowa 4, 20-209 Lublin, Poland ' University of Economics and Innovation, Projektowa 4, 20-209 Lublin, Poland ' Higher Colleges of Technology, DMC, City Walk, Building 13A/102, Dubai, UAE ' Higher Colleges of Technology, DMC, City Walk, Building 13A/102, Dubai, UAE

Abstract: It is documented that overconfidence has negative influence on numerous financial behaviours. Little is known, however, about the link between overconfidence and behaviour of consumers in debt markets. This article investigates the link between overconfidence in debt literacy and debt behaviour. To do that, we applied logit and linear regression models using data from a sample of 600 adult Poles aged between 18 and 35. The results indicate that the overconfident respondents were more likely to borrow. We obtained mixed results regarding the link between overconfidence and debt behaviour. Simple binary measure of overconfidence turned out insignificant in predicting the behaviour, however the quantitative measures of overconfidence were found significantly and positively related to unhealthy debt behaviour. Policy makers may need to run educational programmes that address the behavioural aspects of overconfidence, in order to empower society and improve debt behaviour and overall economic performance.

Keywords: financial literacy; debt literacy; overconfidence; debt behaviour; debt markets; young adults.

DOI: 10.1504/IJBPM.2020.106117

International Journal of Business Performance Management, 2020 Vol.21 No.1/2, pp.95 - 113

Received: 08 Jun 2019
Accepted: 17 Sep 2019
Published online: 30 Mar 2020 *

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