Propensity toward indebtedness : evidence from Malaysia

Purpose: The purpose of this paper is to develop a model for studying the propensity towards indebtedness in Malaysia using behavioural factors. Design/methodology/approach: A self-administered questionnaire was distributed among Malaysians who work in Klang Valley, Kuala Lumpur. The questionnaire contained several demographic variables and four behavioural factors: financial literacy, risk perception, materialism and emotions. A total of 201 completed questionnaires were received and the data were tested using structural equation modelling with partial least squares. Findings: This study found that emotion and materialism are statistically significant for a propensity towards indebtedness, while financial literacy and risk perceptions are insignificant for a propensity towards indebtedness. Originality/value: The results of this study would be useful in helping design better models for credit offerings and addressing credit problems in the long run.