CHAPTER 1

INTRODUCTION

1.0 INTRODUCTION
This chapter will concentrate on the research's introduction to the factors that influence

Malaysian investors' short-term investing decisions (STID). This chapter will primarily detail

the study's history, problem statement, research questions and objectives, scope of the

investigation, and thesis format.

1.1 Background
The success or failure of an investment is determined by the investor's investing decision.

However, there are other factors that can influence investment decisions. Investors must

make sound investing selections and use appropriate investment methods. Because everyone

has various thoughts and feelings when making judgements, everyone will have different

opinions about how to make investing decisions. Even if two investors are similarly educated,

their perspectives on investment decisions may differ.

While Malaysia's economic growth topped its pre-pandemic level in 2022, the

country's economy is likely to suffer challenges in the future year, owing primarily to global

developments. Conditions will continue to shift, and uncertainty will persist surrounding

global economy and global financial markets as major economies tighten monetary policy, as

well as recent banking sector issues, geopolitical conflicts, and supply chain disruptions.

Despite these obstacles, the Bank Negara Malaysia remains committed to maintaining price

stability in order to foster long-term domestic economic growth (Central Bank of Malaysia,

2022). As a result, prospective investors' investment decisions will be influenced.

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 According to studies, Malaysians' involvement in investing activities is favourable,

and more people will enter the market in the future. This will not only help to implement

investment incentives devised by governments and regulatory bodies, such as investment tax

breaks, education or training incentives, the development of information and communication

technologies, and the improvement of laws to encourage investment growth. Similarly, there

will be new investors as well as seasoned investors in the market (Qing, Tenk, Melissa, &

Heang, 2021). External factors have an impact on these investors. For instance, politics, law,

and economics. Making informed financial selections is extremely difficult for investors.

Furthermore, behavioural aspects influence investors' investing decisions, which refer to how

individual investors understand and adjust to information offered by the market or their

environment. This is because investors will make irrational decisions based on their own

thoughts, increasing investment risks and potential losses (Qing, Tenk, Melissa, & Heang,

2021). Economic and financial fluctuations, as well as the business cycle, are heavily

influenced by consumer and investor confidence in the economy and capital markets. When

consumer and investor confidence rise, they want to buy consumer products, durables, and

invest at current prices. When confidence falls, so do spending and risk-taking (Investor

Confidence Index, 2023).

Short-term investments are financial assets or securities purchased with the goal of

holding them for a short length of time, often less than a year. Short-term investing's primary

purpose is to preserve capital while generating modest returns over a short period of time.

Because they give quicker access to funds, these investments are frequently regarded as more

conservative and liquid than long-term investments (TheStreet, 2023). Banks, Fixed Deposits,

Government Bonds, the stock market, real estate, gold, and mutual funds are all viable

investment possibilities.

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 In the capital market, assets are financial assets such as securities and tradeable

instruments. Investors consider investing based on the availability of resources. Some

investors dedicate their resources to short-term investments, while others commit to long-

term investments. A short-term investment, also known as a transitory investment or

marketable security, is a debt or equity security that will be sold or converted into cash within

the next three to twelve months. In other words, it is a stock that management intends to sell

during the current accounting period in order to generate a rapid profit (Ahmad, 2021).

Advanced financial understanding is required for effective and rational investment selections.

Standard finance believes that people always have complete knowledge and make rational

decisions (Merton, 1987).

At any given time, the interest rate influences millions of investment decisions. Each

investment decision makes sense at some interest rates but not at others. The higher the

interest rate, the fewer prospective investments that can be justified; the lower the interest

rate, the greater the number of potential investments that can be justified. Thus, there is a

negative link between interest rates and investment levels (Aeppel, 2005).

Figure 1 below depicts the economy's investment demand curve—a curve that depicts

the amount of investment demanded at each interest rate while keeping all other variables of

investment constant. At point A, the level of investment is $950 billion per year at an interest

rate of 8%. The investment demand curve illustrates that with a lower interest rate of 6%, the

amount of investment requested will climb to $1,000 billion per year at point B. A decrease

in interest rates creates a shift along the investment demand curve.

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 Figure 1: The Investment Demand Curve

Source: University of Minnesota

The investment demand curve depicts the annual volume of investment spending at

each interest rate, assuming all other investment variables remain constant. The curve

indicates that when interest rates decline, the level of annual investment rises. If borrowing

rates were cut from 8% to 6%, for example, investment would rise from $950 billion to

$1,000 billion per year, with all other factors remaining constant.

Financial decision making is widely recognised as a key component influencing

financial capacity and financial well-being. Identifying characteristics that are significantly

connected with financial decisions is thus important for individual and national development

(Janor, 2016). In conventional financial theory, investors are assumed to be rational wealth-

maximizes who obey basic financial principles and base their investment choices solely on

risk-return considerations. Traditional economic theory implies that people are rational actors

that make objective decisions to maximise their possibilities. Investors consider themselves to

be sensible and logical. In conventional financial theory, investors are assumed to be rational

4
wealth-maximizes who obey basic financial principles and base their investment choices

solely on risk-return considerations. Traditional economic theory implies that people are

rational actors that make objective decisions to maximise their possibilities. Investors

consider themselves to be sensible and logical (Lodhi, 2014).

Investment decision making is a complex process since an individual must examine

both financial and non-financial elements that may influence their investment decision

making. The only purpose of the investment is to make a large return; nevertheless, the nature

of the investment is high risk with a high reward. The risk-taking capacity is determined by

their willingness to be either a risk-taker or a risk-averse person. Depending on their

investment activity, investors typically take varying degrees of risk (Mohamad, 2019).

Gender differences in investment behaviour influence investment decision-making. Many

women claimed that their financial preferences are more cautious and risk-averse. Female

investors prefer to stay in a company for an extended period of time even if there is no

predicted return, as opposed to male investors, who are more willing to change their

investment portfolio for a better platform (Mohamad, 2019).

Understanding the critical elements influencing investing decisions enables investors

to efficiently manage risks, save capital, capitalise on opportunities, react to changing market

conditions, and align their investment strategies with their personal goals. Investors can make

better informed and effective investment decisions if they keep informed and conscious of

these aspects.

Since the repeated crises and booms that occurred during the 2000s, behavioural

finance has quickly become a hot issue (Khawaja & Alharbi, 2021). With this growing

attention, various hypotheses and explanations for the factors of individual investors'

decision-making processes have been established (Naveed, Ali, Iqbal, & Sohail, 2020).

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Behavioural finance does not challenge standard finance paradigms that assert that investors

have rational behaviour, but rather suggests the use of psychological decision-making

processes in the identification and forecasting of financial markets (Baker, Kumar, & Goyal,

2021).

Investors want information on a wide range of topics, including economic, social, and

political implications (Luminita, 2014) & (Bhimani & Langfield-Smith, 2007). Though

behavioural information is difficult to quantify because it is a nonfinancial factor, it has a

significant impact on decision making (Adil, Singh, & Ansari, 2021). Economic, political,

and other market situations generate swings in the stock markets; consequently, these

elements must be considered in addition to quantitative and rational analysis (Haritha &

Uchil, 2021). Behavioural finance is the study of issues emerging from market expectations

and the consequent behaviour of investors towards them (Rahman & Gan, 2020). Behavioural

finance is accepted as a component of contemporary accounting and financial management

challenges that studies the behaviour of financial markets using a sociological and

psychological approach (Rajasekar, Pillai, Elangovan, & Parayitam, 2022).

The current study attempts to provide a comprehensive view on all dimensions such

as financial factors such as accounting information of the concern, expected earnings from

the investment, past performance of the investment, marketability of the investment, and so

on, as well as non-financial concerns such as image and reputation of the firm, ethics

followed by the firm, influence of social interactions on investors, and so on. The parameters

taken into account are given by many financial experts and practitioners and are of a

contextual character (Chandra & Kumar, 2012). Accounting information including financial

data of the concern, risk-tolerance factor that is free of bias and obtained from an outside

source of the organisation, firm image including reputation of the concern, and personal

financial needs such as risk minimization and diversification needs are examples of these (Al-

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Tamimi, 2005), (Chandra & Kumar, 2012), (Naveed, Ali, Iqbal, & Sohail, 2020) &

(Sachdeva & Lehal, 2023). All of the publications mentioned above attempt to investigate

investor behaviour from various angles. However, relatively few research has attempted to

evaluate the impact of Malaysian investor behaviour variables. This study aims to fill that gap

by researching the elements that influence Malaysian investors' decisions in order to evaluate

potential Malaysian investors' short-term investment decisions.

1.2 Problem statement

Investment decisions have become significant activity in daily life. As a result, learning about

the various elements impacting these decisions is essential for investors to make fast and

accurate selections (Gill, Khurshid, Mahmood, & Ali, 2018).

Malaysia's dynamic and ever-changing economic landscape has prompted investors to

investigate numerous investment alternatives, including short-term investments, in order to

maximise their financial advantages. Short-term investments are appealing to many investors

since they are low-risk and have quick liquidity. However, the decision-making process

behind short-term investments comprises a complex interaction of numerous elements, both

internal and external, which can have a considerable impact on Malaysian individuals'

investment choices. Furthermore, investment decisions must be clearly specified based on a

numerical number of elements.

1.3 Research Question

Following the arguments mentioned above and based on the literature analysis, the research

questions mentioned below will be explored within the framework of this study:

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i) Is there a positive relationship between accounting information in short-term investment

making decision?

ii) Is there a positive relationship between firm image in short-term investment making

decision?

iii) Is there a positive relationship between personal financial needs in short-term investment

making decision?

iv) Is there a positive relationship between risk tolerance in short-term investment making

decision?

1.4 Research Objective

i) To determine the relationship between accounting information and short-term investment

making decision.

ii) To determine the relationship between firm image and short-term investment making

decision.

iii) To ascertain the relationship between personal financial requirements and short-term

investment decisions.

iv) To investigate the association between risk tolerance and short-term investing decisions.

1.5 Scope of Investigation

This study primarily focused on the decisive elements that influence Malaysian investors'

short-term investing decisions. This study report identifies the primary elements influencing

Malaysian investors' propensity to invest in short-term investments. The research will look

into how numerous internal and external factors influence the decision to make a short-term

investment. Researchers will offer data on four key aspects as well as a short-term investment

choice, which will aid in determining their link. By researching the determinants driving

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Malaysian investors' short-term investing, financial industry stakeholders may improve their

services, increase investor satisfaction, and create a more robust and dynamic investment

landscape in the country.

1.6 Significant of the study

This research will reveal the relationship between the determinant factors and the investment

making intention in short-term investment options where the potential investors will get some

understanding and be better able to optimize investment portfolios and give investors with

capital allocation options. They do, however, have inherent risks due to the quick changes in

market circumstances and the potential influence of economic events. As a result,

understanding the factors that influence investors' short-term investing decisions can greatly

aid in successful risk management and wealth preservation.

1.7 Thesis Framework

This research study is divided into five chapters. The first chapter offers an introduction to

the research as well as general research background information. The chapter also outlines

the problem statement, as well as the research questions and objectives. Finally, before

moving on to the form of the thesis, this chapter discusses the scope of the investigation and

the significance of the study.

The second chapter examines the relevant literature on short-term investment

decisions (STID), as well as discussions on conceptual definitions and STIDs features. The

elements impacting short-term investing decisions will be examined in this chapter. Then, in

this study report, an extensive correlation between dependent variables and independent

9
factors will be established, and appropriate hypotheses will be developed using the theoretical

framework and conceptual framework. The final section of this chapter will highlight the

gaps in the existing literature.

Chapter 3 will go over all of the methodological aspects of this study that must be

decided in order to improve this research project and save the crucial facts on the subject.

Furthermore, this chapter will discuss the research methodologies used in this study. Finally,

this chapter will go through all of the methodologies and instruments that will be used in

selecting participants, data collection techniques, and statistical data analysis procedures,

particularly in interpreting hypotheses.

Chapter 4 discusses the analysis of the acquired data, as well as findings, results, and

debate in the form of interpretation of the findings. This section will address all of the

research questions. In other words, the chapter investigates the relationship between the

determinant elements described above and short-term investment decisions.

Finally, chapter 5 concludes this study by discussing both the study's theoretical

contribution and managerial significance. This chapter also includes recommendations based

on the findings described in the previous chapter, as well as a clear path for future research to

fill the vacuum left by this study.

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 CHAPTER 2

LITERATURE REVIEW AND HYPOTHESIS DEVELOPEMENT

2.0 Introduction

This chapter examines the literature on short-term investment decisions (STID). This chapter

also includes a review of relevant studies on the factors that influence short-term investment

decisions. Finally, before developing the hypothesis, the chapter concludes with a full

description of the four independent variables and the dependent variable, as well as a detailed

literature review.

2.1 Investment Decisions-Making Behaviour

Those investing factors are viewed as those activities and practises that should be attended to

with the end goal of ensuring investment choice making among possible investors in diverse

sectors. All of the potential investors' criteria are provided, and those factors that contribute

to investment decision making are divided into four categories: accounting information, firm-

image-coincidence, personal-financial-needs and risk-tolerance. These elements will be

investigated as hypotheses that have a major influence on potential investors' investing

decisions.

Investment decision-making is the process of selecting a specific alternative from a

set of alternatives. It is also an activity that occurs after a thorough examination of all

available options (Jariwala, 2015). Previous research found that investors' investment

decisions could be reasonable or irrational (Wong & Cheung, 1999). Investors' irrational

decisions are based on numerous behavioural and psychological biases, whereas rational

decisions are based on market statistical data analysis (Janssen, Langager, & Murphy, 2016).

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 However, the intention to conduct a given action, and particularly the willingness of

potential investors to engage in investing behaviour, is influenced by a number of

circumstances. Previous research has shown that, according to the theory of rational

behaviour, two elements influence people's intents to perform behaviour: individual attitude

towards the behaviour and subjective norms (Fishbein M. A & Ajzen, 1975). Furthermore,

based on the theory of planned conduct, beliefs, behaviour, and evaluation of results produce

a set of favourable or unfavourable attitudes towards behaviour. Subjective norms indicate

the outcomes of normative beliefs and motivation to meet the normative standards of others,

while control beliefs determine perceived behavioural control. In general, attitudes towards a

behaviour, subjective norms, and perceived behavioural controls all contribute to the

establishment of a proclivity to engage in a behaviour. Intentions and subjective judgements

of an individual's ability to influence the outcomes of his behaviour account for a significant

amount of the variances in his actual behaviour.

(Iqbal, 2011) investigates the influence of various socioeconomic and demographic

characteristics influencing investor investment decisions. An investment model was designed

to represent the impact of investors' past investing experiences, variations in regulatory

policies, asymmetric information, marital status, gender, and reinvestment aspirations. He

proposed that risk perception is critical in the investment choice process and that changes in

government regulations can influence an investor's risk perception.

Fundamental and technical analysis are used by rational investors to make investment

decisions. The ultimate goal of doing fundamental analysis is to determine the value, which

may be equated with the present price of a company, and determining how to deal with a

certain stock (i.e., underpriced stocks=buy and overpriced stocks=sell). Fundamental analysis

is also influenced by macroeconomic and firm-specific factors, whereas technical analysis

evaluates equities by reviewing statistical data created by market activity, such as past stock

12
prices and volume. Technical analysis is primarily based on stock performance in the past to

forecast future returns on stock investment (Kenneth L & Meir, 1997). (Janssen, Langager, &

Murphy, 2016) noted that technical analysis is often based on stock price movement, and

investors use this to predict future stock price fluctuations. Technical analysis is commonly

used by rational investors for short-term investment (Lui & Mole b, 1998).

Investors may encounter investing opportunities with uncertain possibilities and

outcomes. Previous research has also demonstrated that risk and uncertainty are major

predictors of investor attitudes and investment activity (Alleyne & Broome, 2011). As a

result, the current study's objective was to analyse factors impacting investing intentions

using the theory of planned behaviour and the theory of risk.

More positive attitudes, subjective norms, perceived behavioural control, and more

desired behaviour increase an individual's intention to execute behaviour under the same

conditions. Empirical evidence suggests that the theory of planned behaviour can

considerably predict the relationship between intentions and increased access to new dangers

(Ajzen, 1991).

Different behavioural and psychological aspects influence investors. Individuals who

invest in stocks should put safeguards in place to manage mental errors and develop efficient

investment methods (Ricciardi & Baker, 2015). Investors will become aware of how potential

biases may influence their investing intentions and, as a result, investment decisions. As a

result of their grasp of behavioural finance, people can avoid making such mistakes

(Muradoglu, 2012).

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 Table 1: Previous Research on Factors on Investment Decision

Author &
Title Findings
Country

Accounting-information has
Ahmad Zaidi & Survey on the factors that influence short-term the most influential
Hj Tahir, 2019
(Malaysia) investment decision among Malaysian factor in investment decision
making
Badshah, Financial literacy & risk
Hakam, Khan, Factors Affecting Short-Term Investment aversion have non-significant
impact on short-term
& Saud, 2014 Intentions of Stock Investors in Pakistan
investment intentions.
(Pakistan)
Yang, Mamun, Predicting Stock Market Investment Intention and
Mohiuddin, Al- Behaviour among Malaysian Working Adults Positive effect of risk tolerance
Shami , & Using Partial Least Squares Structural Equation on stock market investment
Zainol, 2021 Modelling. intention
(Malaysia)
The individual shareholders
Mohamad, were considering the
Tahir, & The Influential Factors of Investment Decision characteristic of the company,
Making in Malaysian Publicly Listed Companies which are accounting
Ahmad, 2019
information and images of the
(Malaysia) company in making
investments.
Factors Influencing Individual Investor Behavior: Financial literacy and risk
An Empirical Study of City Karachi taking have positive
Lodhi, 2014
correlation.
(Pakistan)
Samsulbahri, The variable seems to be
Ishak, Gazali, Factors Influencing The Investment Decision associated with investment
Fikri Ag Omar, Behaviour Among Young Muslim Adults in decision
& Abd Razak, Malaysia behaviour, but has not been
2021 tested yet.
(Malaysia)
investors who have strong
Schenk, extraversion, agreeableness
Factors Influencing Individuals’ Short-term
Koekemoer, & and openness to experience
Investment Intentions
Shah, 2021 personality traits will be
(Africa) more likely to invest in short-
term investment portfolios.

2.2 Research Framework and Hypotheses Development

Figure 2 below shows the research framework used in this study. The dependent variable in

this study is the short-term investment decision making of potential Malaysian individual

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investors, and the independent variables are accounting-information, firm-image, personal-

financial-needs and risk tolerance. The questionnaire has gathered all of the information.

Accounting-Information
(AI)

FIrm-Image (FI)
Short-Term Investment Decision
(STID)
Personal-Financial-
Needs (PFN)

Risk-Tolerance (RT)

Figure 2: Research Framework

2.2.1 Short-Term Investment Decision (STID)

Normally, investors earn returns by allocating cash to either stock or debt assets. Investors

may want to reconsider their investment portfolios in light of recent market events. In an

uncertain and unpredictable environment, investors make decisions based on trial and error or

ancient rules of thumb. However, while considering investment alternatives, cognitive and

emotional factors are added, which can eliminate logical behaviour in the decision-making

process. Individuals can now invest in a wide range of financial instruments as the financial

industry expands. As a result, the study of behavioural finance has contributed to a better

understanding of individual investors' behaviour by revealing the personal characteristics and

psychological processes that influence their investing intentions and subsequent judgements

(Lim, Soutar, & Lee, 2013).

Short-term investments are seen to compensate for a good existence because their

early return can protect investors from a potential financial collapse (Ferreira-Schenk,

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Dickason-Koekemoer, & Shah, 2021). Short-term investment intentions refer to investors'

willingness to invest in things that can be converted into cash within the next three to twelve

months (Sashikala & Chitramani, 2021). Investors' intentions to invest in short-term

investment products are influenced by a variety of factors, including accounting knowledge,

risk tolerance, corporate image and personal needs.

Individuals, according to classical economic theory, operate rationally in order to

maximise their wealth by following basic financial rules and taking into account all available

information when making investment decisions. When undertaking investment analysis, they

typically use fundamental analysis, technical analysis, and judgement (Kishan & Alfan,

2018). Market information structure and characteristics often impact investment decisions.

Individual risk tolerance, on the other hand, determines the level of danger that people are

willing to take. Regardless of how well-informed a person is or how much study they have

done on investment items before investing, they will still act impulsively due to the fear of

future loss (Divanoğlu & Bağci, 2018).

2.2.2 Accounting Information (AI)

Accounting information was ranked higher than firm specific attributes/reputation, net asset

value, and trading opportunity, while publicity, ownership structure, people's influence, and

personal financial demands were ranked lower. The findings indicate that the priority

attributed to each of the parameters, barring ownership structure, varies considerably with at

least one demographic characteristic of sample respondents (Hossain & Nasrin, 2012). They

also argued that the most essential major elements were company particular

attributes/reputation, net asset value, and accounting-information. The findings indicate that

the priority attributed to each of the parameters, barring ownership structure, varies

considerably with at least one demographic characteristic of sample respondents. They also

16
discovered that accounting information is the most influential component in investing

decision-making.

Accounting information, in general, is one of the key inputs into investors' valuation

models, the goal of which is to arrive at an estimate of the firm's and/or its securities'

underlying value. Such models frequently require estimates of future earnings, book values,

and/or cash flows, and accounting information, despite its lack of timeliness and historical

focus, is typically used as the foundation for such forecasts. However, research indicates that

there are changes over time and differences by firm type, with multi-period intrinsic models

(such as those based on discounted cash flows) becoming more widely used in recent years

and in industries where accounting information (particularly the balance sheet) may not

capture a large share of the firm's operating activities, such as pharmaceuticals and

technology firms (Demirakos, Strong, & Walker, 2004).

Individual eccentricity, wealth maximisation, risk minimization, brand perception,

social responsibility, financial expectation, accounting-information, government & media,

economic expectation, and advocate recommendation factors were also discovered to have an

impact on investors. However, the majority of the factors that influence investors are due to

accounting information (Sultana & S Pardhasaradhi, 2012).

(Ronald, Volpe P, & Kotel, 2012) surveyed 212 benefit administrators in charge of

personal finance programmes in US-based employers to identify and analyse relevant

personal accounting-information for working persons. The results suggested that estate

planning and investing were the least important categories. The least important topics were

understanding mutual fund prospectuses, mutual fund fees, and cost ratios. Working

individuals were also found to be the least educated about the areas they deemed least

17
essential, according to the participants. In general, benefit administrators reported that

working people' awareness was quite low.

Meanwhile (Mirshekary & Saudagaran, 2005) The value of diverse sources of

information in making investment decisions was analysed, as well as how different users of

financial statements utilise the information items presented in annual reports. In Tehran, they

provided a questionnaire to seven different types of financial statement users, including

stockbrokers, bank investment executives, and institutional investors. Annual reports were

chosen as the most influential source of information by respondents in general. Oral

information was the second most influential source of information, and the third was the

published daily share price. The least influential variables, on the other hand, were placed in

order of importance by respondents: counsel from friends and acquaintances, tips and

rumours, and stockbrokers advise. Mirshekary and Saudagaran observed that accounting

information is frequently used as a basis for investment decisions in Iran.

Accounting information includes information on the company's financial accounts,

the investment's marketability and affordability, predicted earnings from the investment, and

the investment's prior performance. According to the literature, AI is the most influential

factor in investment decisions (Al-Tamimi, 2005), (Hodge, 2003), (Dass, 2012). Companies

that are listed on a stock exchange are obligated to report financial information (Nagar,

Schoenfeld, & Wellman, 2019). Financial statements appear to be the most objective and

dependable source of information for investors to determine a company entity's profitability

(Ku Ismail & Chandler, 2005). Individual investors care about earnings per share, dividend

payout ratio, yield, and return on investment (Sastry & Thompson, 2019). Annual reports

reflect the company's financial situation and demonstrate the organization's ability to properly

manage its resources (Chang & Cheng, 2015). Shareholders make economic decisions based

on the information offered by financial statements (Drover, Wood, & Corbett, 2018). Based

18
on the findings of this study, the following hypothesis is proposed in light of the favourable

relationship between accounting information and short-term investment decisions:

Hypothesis 1 (H1): There is a positive relationship between accounting-information in

short-term investment decision making.

2.2.3 Firm Image (FI)

A company's image, often known as its reputation or brand perception, can have a substantial

impact on investment decisions made by investors. Financial performance, product or service

quality, corporate governance, environmental and social responsibility, customer satisfaction,

and public relations are all variables that influence a company's image.

A study done by (Islam, Rahman, & Yousuf, 2015) investigated the factors

influencing investment decisions in Bangladesh. According to the findings, company images

are one of the 25 criteria that affect investors in Bangladesh. According to a survey of 1500

individual equities investors on the factors impacting Indian equity investors' decision

making and behavior, done by (Sultana & Pardhasaradhi, 2012) Information about the firm's

image influences the decision-making and conduct of Indian individual stock investors.

All publicly traded organisations with a positive company image prioritise aspects

such as quality management decisions, brand building, and transparency in settling issues.

Companies, in particular, should constantly monitor interest rates and other companies'

marketing activities in order to get a better market position (Viswanadham, Edward ,

Dorika , & Mwakapala, 2014). Companies, in particular, should constantly monitor interest

rates and other companies' marketing activities in order to get a better market position. Firm-

image the synchronicity of corporate governance plays an essential role in investment

19
decision making, and it was discovered that even institutional equity fund managers were

risk averse (Qureshi & Hunjra, 2012).

When a company's name is mentioned, the mental image that comes to mind is called

the firm's image. It is a set of psychological views that shift depending on the company's

circumstances, media attention, performance, and statements, among other factors (Epstein &

Freedman, 1996). Expert advice, accounting information, financial performance, corporate

image, and historical performance were discovered to be significant influencing factors

determining investment behaviour among young professionals (Ansari & Moid, 2013). The

most important factors that influence investors' investment decisions are the firm's

reputation, industry status, expected corporate earnings, profit, and condition of the

statement, past performance of the firm's stock, price per share, feelings about the economy,

and expected dividend (Jagongo & Mutswenje, 2014).

In another study which examined individual investors' desire for social knowledge.

The findings demonstrate the value of annual reports to business shareholders. In addition,

the majority of shareholders polled want the corporation to report on corporate ethics,

employee relations, and community involvement (Epstein & Freedman, 1996). The most

influential factors are firm-image coincidence, financial performance of the company, long

term performance of stock, sentiment for the stock market, expected results of the company

(cash dividend, bonus share, buyback of shares), reputation of firm, movement in stock

market, affordability of share price, and the least influential factors are coverage in print

media, company's ratio analysis, corporate social responsibility of the company, share traded

in multiple exchanges, and share traded in multiple exchanges (Ahmad Zaidi & Hj Tahir,

2019).

Concerns about a firm's image include feelings about its products and services, its

standing or reputation, its perceived ethics, and its role in solving community

20
problems. Though financial information is useful for making investing decisions, investors

also look beyond the numbers to do thorough stock analysis (Sultana, Zainal, & Zulkifli,

2018). Companies that prioritise environmental and social problems maintain an ethical

approach to their shareholders' responsibility (Cohen, Holder-Webb, & Zamora, 2015).

Investors also desire to invest in organisations that are socially responsible. The firm's

perceived image is still important in indicating trust in financial markets (Stalnacke, 2019).

Corporate reputation is the organization's external perception, which exists only in the eyes

of important stakeholders (Gotsi & Wilson, 2001). Investors also like to invest in

organisations that are socially responsible and well-known (Helm, 2007). As a result, the

second hypothesis is based on the premise that firm-image (FI) will positively influence

short-term investment decisions (STID):

Hypothesis 2 (H2): There is a positive relationship between firm-image in short-term

investment decision making.

2.2.4 Personal Financial Needs (PFN)

One of the most significant personal-financial-needs is personal investments. Investments are

a supplementary source of income that ensures consistent cash to meet personal needs and to

achieve financial goals, the most important of which is financial independence. In a broad

sense, investment is the financial resources used to invest in various assets that have a

temporal value increase tendency (Ahmad Zaidi & Hj Tahir, 2019). According to a study

conducted by (Barayandema & Ndizeye, 2018) ,there are two characteristics that are actually

relevant to investment decisions on the Rwanda Stock Exchange. One of the variables is a

psychological factor, which includes irrational thinking, the drive to become wealthy rapidly,

21
and cognitive biases.

Before beginning an investment, a person must examine their financial condition and

potential, which include revenue, expenditure, age, family structure, the requirement for

liquid funds, and other factors. Knowing how much money may be invested, what goal is to

be achieved, and for how long it was chosen to invest allows you to determine the level of

risk and reward that you desire, as well as properly select investment instruments. States that

personal financial management is affected by the social status of the individual (Gedmintiene

& Visockaite, 2016).

Another study by (Merika, Merikas, & Vozikis, 2004), concluded that the most

relevant variables were associated with traditional wealth maximization criteria, which

contributed the most to their personal-financial demands. Most stock investors were

unconcerned about press coverage, statements from politicians and government officials, or

political party identification. Accounting information, personal financial needs,

subjective/personal, advocate suggestion, and impartial information were found as five

essential elements. (Sultana & S Pardhasaradhi, 2012) investigated the elements influencing

Indian individual equities investors' decision making and behaviours. The questionnaires

were distributed to 1500 stock investors in order to collect data. Personal and financial

demands, according to the report, are the second most important criteria impacting the

decision-making and behaviour of Indian individual equities investors.

Risk minimization, diversification, ease of borrowing funds, attractiveness of non-

stock investments, and local and international activities are all examples of personal financial

demands. According to the literature, investors' immediate consumption requirements, such

as quick returns and convenience of borrowing cash, appear to be one of the most influential

elements in investing decisions (Al-Tamimi, 2005). Personal financial requirements are

prioritised over accounting and unbiased facts (Hossain & Nasrin, 2012) & (Nagy &

22
Obenberger, 1994).

The flow of information, such as government actions, media stories, and so on, causes

stock prices to rise or fall. Stock investors make investment decisions based on the stock

market's behaviour and new information (Wäneryd & Carl-Erik, 2001). Prior to negative

earnings shocks, those investors who have insider information reduce their holdings more

than those who do not have this information. Furthermore, investors who have private

information about a firm's future prospects trade more aggressively than investors who do not

have such information (Baik, Kang, & Kim, 2010). Investors can establish a judgement on a

firm's value based on information about it, regardless of its source (Nwezeaku & Okpara,

2007).

Risk minimization, diversification, ease of borrowing funds, attractiveness of non-

stock investments, and local and international activities are all examples of personal financial

demands. According to the literature, investors' immediate consumption requirements, such

as quick returns and convenience of borrowing cash, appear to be one of the most influential

elements in investing decisions (Al-Tamimi, 2005) implies a cause-and-effect relationship

between risk perception and individual investment decisions. Diversification requirements are

seen as an influencing factor in investment decisions and their financial effects (Aggarwal,

Kearney, & Lucey, 2012) whereas some academics place less emphasis on investors'

diversification and risk aversion needs (Al-Tamimi, 2005). Personal financial requirements

are given less weight than accounting and neutral facts (Hossain & Nasrin, 2012) & (Nagy &

Obenberger, 1994). Similarly, the third hypothesis is based on the expectation that PFN has a

significant role in influencing short-term investment making decision:

Hypothesis 3 (H3): There is a positive relationship between personal-financial-needs in

23
short-term investment decision making.

2.2.5 Risk Tolerance (RT)

Financial risk tolerance occurs when a person is willing to tolerate the uncertainties of an

investing decision. Risk tolerance is said to have a significant impact on investment

behaviour (Abdul Wahab, Rahim, Sabri, & Othman, 2017). Tolerance for low-risk Investors

have a tendency to invest without fully understanding the financial risks involved (Sarwar &

Afaf, 2016). Investors' investment behaviour is influenced by their risk tolerance. Investors

with a high-risk tolerance invest in higher-value companies (Lim, Soutar, & Lee, 2013). The

study looked at the differences in investment decisions and behaviours between high and low

uncertainty avoidance investors. In the study, investors with low uncertainty avoidance

exhibited the following characteristics. (1) They were more adaptable; (2) they accepted

uncertainty with less discomfort; (3) they took risks more easily; and (4) they exhibited better

tolerance for the opinions and behaviours of others. As a result, individuals demonstrated

high risk tolerance and confusion or ambiguity about whether their investment will provide a

profit or a loss. An investor invests in volatile investments in order to make more money than

the average.

Risk tolerance is the readiness to accept risks associated with investments. It also

refers to how a person reacts to and acts in response to hazards in an investment. It is

conceivable for investors to like risk, avoid risk, or have no interest in risk at all (Wulandari

& Iramani, 2014). Risk tolerance can assist a person in understanding the level of risk

associated with investment and in being able to tolerate and harmonise existing risks to suit

investment objectives so that the risk that someone is willing to accept is in accordance with

the rate of return that will be received in the future. Risk tolerance influences investors'

judgements when it comes to selecting investing alternatives (Pak & Mahmood, 2015).

24
 The uncertainty that will be received when making a financial investment is referred

to as risk (Grable, 2008). Risk-takers are more likely to exhibit heuristic biases and have

higher degrees of overconfidence. These individuals disregard current market information

and rely on heuristics based on prior experience. Risk-averse people use a systematic

decision-making process, whereas risk-takers use a heuristic approach (Ahmad, 2020).

When profiling their clients' investment goals, financial planners must consider

demographic, socioeconomic, and psychological characteristics, as these elements influence

individuals' financial risk tolerance (Van De Venter & Michayluk, 2012). Furthermore, risk

tolerance is a single aspect that may influence the asset mix in a portfolio, which is defined as

the optimum risk and return level taking into consideration an investor's needs (Hallahan,

Faff, & Mckenzie, 2004). Risk tolerance is comprised of four components: social, ethical,

physical, and economical (Sulaiman, 2012). Furthermore, Age, marital status, gender,

occupation, income, and investment expertise are all factors that influence risk tolerance

(Sulaiman, 2012). Younger people tend to assume more risk than those approaching

retirement age (Finke & Huston, 2003). (Sulaiman, 2012) generated contradicting results by

demonstrating that people' levels of risk tolerance do not decline with age. Furthermore,

women are more likely to avoid risk, whereas males prefer riskier investments (Charness &

Gneezy, 2012). Another study by (Croy, Gerrans, & Speelman, 2010) revealed that

Individuals with a high income have a high risk tolerance.

Several strategies have been developed to assess financial risk tolerance. The

techniques are classified as measures based on detecting dangerous activity and

measurements based on survey questions that estimate one's readiness to tolerate risk in

specific circumstances (Hanna & Lindamood, 2004). There is an inverse relationship between

financial risk tolerance and economists' idea of risk aversion (Hanna, Shevlin, & Dempster,

2008). People with a high risk aversion are more likely to have a poor risk tolerance for

25
financial risk, and vice versa. ones who assume more risks in their portfolios are more likely

to gain money over time than risk-averse ones (Grable & Roszkowski, 2007). Based on that,

the fourth hypothesis is established under the assumption that risk tolerance will favourably

influence short-term investment decision:

Hypothesis 4 (H4): There is a positive relationship between risk-tolerance in short-term

investment decision making.

26
 CHAPTER 3

RESEARCH METODOLOGY

3.0 Introduction

The primary goal of this chapter is to go over the methodology used in this study. In Chapter

3, all of the methodologies and approaches used to perform this research will be thoroughly

detailed. This chapter will also demonstrate the strategies used in this research for collecting

data, analyzing the collected data, and presenting the study results in an attempt to answer

the main research questions through its various sub-sections such as research method,

research samples, sampling method, sampling size, research instrument, pilot study, data

collection and data analysis technic.

3.1 Research Method

In contrast to qualitative research, quantitative research deals with numerical or numerically

convertible data. 'Statistics' refers to the fundamental methodologies used to analyse

numerical data. Statistical approaches are involved with organising, analysing, interpreting,

and presenting numerical data (Sheard, 2018).

In this research paper, a quantitative experimental research method will be employed

to evaluate five different variables using numbers and statistics to study the results of this

research. This study will employ an experimental research design that employs two sets of

variables and a scientific technique to conduct the investigation. The second set's deviations

are compared to the first set as a reference standard. The investigation should identify a

definite cause and effect by the end of this study. The study's data should yield short, clear
27
answers to the overview's questions and provide a realistic portrayal of the factors influencing

short-term investment decision among Malaysian investors.

3.2 Research Samples

This paper will contain secondary data based on a primary online questionnaire source. The

Malaysian population ranging in age from 21 to 60 is chosen as the target group since the

major goal is to examine the factors influencing short-term investment decision among

Malaysian investors. They were chosen because this group consists of working people with

spending power. Aside from the age range specified above, no specific exclusions were

addressed in this investigation.

3.2.1 Sampling Method

The study employed a probability sampling technique. Probability sampling is a research

method that employs random sampling to analyse a subset of a population (Horton, 2023).

This is done to ensure that everyone in the population has an equal chance of getting chosen.

To be more explicit, the basic random sampling approach was chosen in the process of

choosing a subset of Malaysia's total population.

Producing a simple random sample, as the name implies, is far less complicated than

other procedures. This procedure requires no particular abilities and can produce a reasonably

consistent output. This approach divides bigger groups into smaller subgroups known as

strata, in this case the population of Malaysia. Members are categorised into these groups

based on any shared characteristics. Individuals in the subset are chosen at random, as

previously stated, and no extra procedures are taken.

28
3.2.2 Sampling Size

The sampling size includes the total Malaysian population aged 21 to 60, which is estimated

to be 19,926,729 persons (PopulationPyramid.net, 2023). According to the sampling size

table developed by (Ahmad & Halim, 2017), a total of 385 random samples will be gathered

to reflect the overall sampling frame in this study in order to obtain the relevant data.

3.3 Research Instrument

The tools for data collecting are known as research instruments. They consist of

questionnaires, interviews, observations, and readings (Munir, 2017). A questionnaire is used

as the instrument of the study. The questionnaire is a methodically produced form that

contains a series of questions designed to elicit replies from respondents or research

informants in order to collect data or information. The respondents are the study's population

samples. The data for the report is derived from the respondents' responses. The questionnaire

for this study will solely contain closed-ended questions. Closed-ended or limited-choice

questions present respondents with a predetermined set of possibilities from which to choose.

Closed-ended inquiries are effective for acquiring quantitative information. Closed-ended

questions with a clear design are easy to understand and answer to.

The questionnaire will be divided into two sections. In section A, a nominal scale was

utilised, however the scale used to measure the B section of the questionnaire was a Likert

scale ranking (5point), where 1 represented the least degree of agreement and 5 represented

the greatest degree of agreement. Section A includes several questions about respondents'

basic demographic information such as gender, age range, ethnicity, degree of education, and

monthly income range. Section B, on the other hand, addresses problems concerning the

dependent variable, short-term investment decision (STID), as well as all four independent

29
variables, accounting-information (AI), firm-image (FI), personal-financial needs (PFN), and

risk-tolerance (RT). There will be a total of 23 questions on factors adapted and modified

from prior studies on investment decision making. The next section explains the

measurements and questionnaire items used for each variable.

3.3.1 Short-Term Investment Decision

The short-term investment decision variable was examined using 4 separate items from

(Mayfield, Perdue, & Wooten, 2008) as it was the most common scale used to measure short-

term investment decisions. For the replies to all four items relating to the short-term

investment decision variable, the Likert scale was used, and each respondent was required to

select a number between "1" (strongly disagree) and "5" (strongly agree) to represent the true

assessment. The items were adopted and modified to meet the needs of the research. The

adapted and modified items for the short-term investment decision variable in this study are

detailed in Table 2.

Table 2: Measurement items for short-term investment decision

Code Original Item Adapted Item Source
STID1 I intend to put at least half of my I plan to invest at least half (Mayfield,
investment money into the stock of my money in the stock Perdue, &
market. market. Wooten, 2008)
STID2 I intend to engage in portfolio I intend to engage in (Mayfield,
management activities at least twice portfolio management to Perdue, &
per week. meet the specific financial Wooten, 2008)
goals.
STID3 I intend to perform my own I plan to do my own (Mayfield,
investment research instead of using investment research, not Perdue, &
outside advice. outside consulting. Wooten, 2008)
STID4 I intend to compare my portfolio I compare the performance (Mayfield,
performance to that of professional of my portfolio with the Perdue, &
managers. performance of professional Wooten, 2008)
managers.

30
3.3.2 Accounting-Information

The accounting-information variable was examined using 6 separate items from (Vaidya,

2021). For the replies to all six items relating to the accounting-information variable, the

Likert scale was used, and each respondent was required to select a number between "1"

(strongly disagree) and "5" (strongly agree) to represent the true assessment. The items were

adopted and modified to meet the needs of the research. The adapted and modified items for

the accounting-information variable in this study are detailed in Table 3.

Table 3: Measurement items for Accounting-Information

Code Original Item
AI1 Accounting information helps
investors to evaluate the company’s
performance before investing in its
shares.
AI2 Accounting information helps
investors to monitor their
investment decisions.
AI3 Accounting information assists
investors to predict the current and
future profitability of firms.
AI4 Accounting information helps
investors to predict future dividends
AI5 Accounting information helps
investors to assess the liquidity of
the companies.
AI6 Accounting information assists
investors to predict the current and
future profitability of firms.
Adapted Item Source
Accounting information (Vaidya,
allows me to assess a 2021)
company's performance
before investing in its stock.
Accounting information (Vaidya,
allows me to keep track of 2021)
their investing selections.
Accounting data helps me (Vaidya,
forecast a company's current 2021)
and future profitability.
Accounting data allows me to (Vaidya,
forecast future dividends. 2021)
Accounting information (Vaidya,
assists me in determining a 2021)
company's liquidity.
Accounting data allows me to (Vaidya,
forecast a company's current 2021)
and future profitability.

3.3.3 Firm-Image

The firm-image variable was examined using 4 separate items from (Nagy & Obenberger,

1994). For the replies to all 4 items relating to the firm-image variable, the Likert scale was

used, and each respondent was required to select a number between "1" (strongly disagree)

31
and "5" (strongly agree) to represent the true assessment. The items were adopted and

modified to meet the needs of the research. The adapted and modified items for the

accounting-information variable in this study are detailed in Table 4.

Table 4: Measurement items for Firm-Image

Code Original Item Adapted Item Source

FI1 Firm’s reputation in My investing decision (Nagy &

industry is influenced by the Obenberger, 1994)
firm's industry
reputation.
FI2 Firm’s governing My investment decision (Nagy &
body (Board of is influenced by the Obenberger, 1994)
Directors & CEO) firm's governing body.
FI3 Firm’s strong My investment decision (Nagy &
position in the is influenced by the Obenberger, 1994)
industry. firm's strong position in
the industry.
FI4 Contribution of a My investment decision (Nagy &
firm towards social is influenced by the Obenberger, 1994)
causes firm's involvement in
social initiatives.

3.3.4 Personal-Financial-Needs

The personal financial needs variable was examined using 4 separate items from (Nagy &

Obenberger, 1994). For the replies to all 4 items relating to the personal financial needs

variable, the Likert scale was used, and each respondent was required to select a number

between "1" (strongly disagree) and "5" (strongly agree) to represent the true assessment. The

items were adopted and modified to meet the needs of the research. The adapted and

modified items for the accounting-information variable in this study are detailed in Table 5.

32
 Table 5: Measurement items for Personal-Financial-Needs

Code Original Item Adapted Item Source

PFN1 Ease of obtaining Ease of obtaining (Nagy &

borrowed funds. borrowed funds effect Obenberger, 1994)
my investment decision
making.
PFN2 Expected losses in Losses in the domestic (Nagy &
national and and foreign financial Obenberger, 1994)
international finance markets influence my
market. investment decisions.
PFN3 Diversification My investment (Nagy &
needs. decisions are influenced Obenberger, 1994)
by the need for
diversification.
PFN4 Attractiveness of The attractiveness of (Nagy &
non-stock short-term investments Obenberger, 1994)
investment. influences my investing
decision.

3.3.5 Risk-Tolerance

The risk-tolerance variable was examined using 4 separate items from (Nagy & Obenberger,

1994) and (Salameh, Akhtar, Gul, Omar, & Hanif, 2022). For the replies to all four items

relating to the risk-tolerance variable, the Likert scale was used, and each respondent was

required to select a number between "1" (strongly disagree) and "5" (strongly agree) to

represent the true assessment. The items were adopted and modified to meet the needs of the

research. The adapted and modified items for the accounting-information variable in this

study are detailed in Table 6.

33
 Table 6: Measurement items for Risk-Tolerance

Code Original Item Adapted Item Source

RT1 I have risk tolerance I am risk averse in (Nagy &

towards my investment my investment Obenberger, 1994)
decisions. decisions.
RT2 My reaction towards My reaction towards (Nagy &
losses are normal losses are normal Obenberger, 1994)
RT3 The more money one The more money I (Nagy &
has, the more have, the more Obenberger, 1994)
investment risk one can investment risk I will
take take.
RT4 To earn greater reward, I am willing to incur (Salameh, Akhtar,
I am willing to take a larger risk Gul, Omar, & Hanif,
higher risk. investment in order 2022)
to obtain a higher
profit.

3.4 Pilot Study

A pilot study provides crucial information not only for calculating sample size, but also for

assessing all other components of the main study, minimising wasted work from researchers

and participants, as well as research resource dissipation (Junyong In, 2017).

The validity and reliability of the instruments could be assessed based on the findings

of the pilot research prior to the overall data collection process. The degree to which an

instrument actually measures what it is supposed to assess is known as validity, whereas

reliability indicates that the instrument is error-free and has stayed consistent throughout

time. Typically, a subset of the population, ranging from 30 to 50 respondents, will be chosen

for pilot study. As part of the pilot test, 50 samples will be collected for this study.

34
3.5 Data Collection

This quantitative study used a set of self-administered questionnaires, which will be

created as an online form at Google web application and the web link to access that online

form will be distributed through social media such as WhatsApp, Facebook, Twitter, and

Instagram, as well as other online mediums such as emails, etc. The constructed website URL

will be distributed to Malaysian individuals aged 21 to 60.

Online surveys are popular due to their low cost and overall ease. Respondents can

answer questions on their own time and at their own speed. Besides that, the responses of

respondents are automatically saved, so we may have the findings at our fingers in no time.

This transforms the data analysis into effortless and rapid action.

3.6 Data Analysis

The acquired data will be examined using the Statistical Package for Social Sciences (SPSS)

software, which will employ four different approaches of analysis: descriptive analysis,

reliability analysis, correlation analysis, and regression analysis. Prior to analysing the

collected data, preliminary data processing work was required to remove outliers and missing

data concerns. The most prevalent type of missing data occurs when respondents neglect one

or more questions from a questionnaire. Deleting missing values has some advantages,

including lowering the amount and complexity of the dataset, preventing errors or biases that

can occur from imputing or replacing missing values, and preserving the data's original

distribution and variance.

35
3.6.1 Descriptive Analysis

Descriptive analysis is a sort of data analysis that helps to explain, show, or summarise data

points in a constructive way so that patterns can develop that satisfy all of the data's

conditions. Descriptive approaches frequently include creating tables of quantiles and means,

dispersion methods such as variance or standard deviation, and cross-tabulations or

"crosstabs" that can be used to test several hypotheses. These hypotheses frequently

emphasise disparities between subgroups. It provides a conclusion about the distribution of

the data, aids in the detection of typos and outliers, and allows for the identification of

commonalities between variables, preparing for further statistical analysis (Rawat, 2021).

3.6.2 Correlation Analysis

Correlation Analysis is a statistical tool used to determine whether or not there is a

relationship between two variables/datasets and the strength of that relationship. Correlation

analysis is used in market research to examine quantitative data acquired from research

methods like as surveys and polls to determine whether there are any noteworthy links,

patterns, or trends between the two. Essentially, Correlation analysis is mostly used to detect

trends in datasets. A positive correlation indicates that both variables rise in proportion to one

other, whereas a negative correlation indicates that as one variable falls, the other increases

(James, 2021). This method will be employed in this study to determine the relationship

between the determining elements and the short-term investment choice.

36
3.6.3 Regression Analysis

Regression analysis is a mathematical method for determining which of those factors has an

effect. It provides answers to the following questions: Which factors are most important?

Which can we disregard? What is the relationship between those variables? And, maybe most

importantly, how confident are we in all of these variables? In regression analysis, these

elements are referred to as "variables." In regression analysis, if the R square value is close to

one, the model is likely to fit the data well. However, anything greater than 0.5 has been

judged significant. Beta is used to make the regression coefficient more similar. This method

will be used in this study to assess the fit of the variables into the framework.

37
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