FINANCIAL LITERACY AND ITS DETERMINANTS: A CASE OF PROFESSIONALS IN COLOMBO DISTRICT SRI LANKA

This observation intends to examine the financial literacy level of professionals working in the professions of Medicine (Doctors), Engineering (Engineers), Management (Managers), Law (Lawyers) inclusive Aviation and Navigation (Captains and Pilots), and its determinants. The methodology was a quantitative survey approach involving a sample of 300 respondents from the Colombo district. The analysis revealed that Basic and Advanced financial literacy among professionals is at a medium level. However, the level of financial literacy was not at a satisfactory level among non-management professionals, particularly doctors and lawyers. The results of the Regression analysis revealed that Economic and financial education, self-analytical skills, the field of employment, and monthly income level as influential determinants of financial literacy. The professions with less exposure to economic and financial education have low financial literacy. Findings demonstrate the growing importance of implementing a national strategy to improve financial and economic educational programmes, particularly for individuals who are not working in the professions related to management.


Introduction
Financial literacy is defined by the Organization for Economic Corporation and Development (OECD) as "A combination of awareness, knowledge, skills, attitudes, and behavior necessary to make sound financial decisions and ultimately achieve individual financial well-being" (Atkinson & Messy, 2011).Given the complexity of today's Economy, this concept has become a substantial need.The changes in life expectancies and the gradual transformation of employersponsored benefit schemes into privately defined contribution plans shift the responsibility of International Journal of Accounting & Business Finance Vol.9, No.2, December 2023 Issue. pp. 45-73 personal finance towards individuals (Lusardi, 2019).Simultaneously financial markets are rapidly changing with the rapid expansion of Financial Technology (Fintech).Hence financial products have become complicated and not easily accessible, especially for financially unsophisticated investors.Therefore, "Financial Literacy" creates a road map for individuals to be competent in financial decision-making, especially in their savings, retirement planning, and short-term, and long-term investments (Lusardi & Mitchell, 2005;Lusardi, 2019).Not only from a personal financial decision-making perspective but also from a macroeconomic perspective, for a country to move away from a crisis towards prosperity, having a satisfactory level of financial literacy is important.With the global financial crisis in 2008, consumer over-indebtedness and household bankruptcy provided evidence to support that requirement.Hence increasing individuals' financial literacy should be a public policy objective to stimulate Economic growth and well-being (Huston, 2010;Ghoshray et al., 2020;Pasa et al., 2022).Hence financial literacy and economic development go hand in hand.
Relevance to Sri Lanka, the country is renowned for having excellent adult literacy rates, and data from the Central Bank of Sri Lanka in 2021 show that financial literacy has also dramatically increased, rising from 35% in 2014 to 57.9 % (Financial Literacy Survey Sri Lanka, 2021).Recent research, however, indicates that financial literacy among different population groups is not at an adequate level such as individual investors (Weerasena & Morage, 2019;Tennekoon & Liyanage, 2021), entrepreneurs (Kumari et al., 2021), rural communities (Weerasinghe & Jayasinghe;2022), and University students (Priyadarshani & Kumari, 2021;Edirisinghe et al., 2017).Among the academics, the financial sophistication is at a medium level.
However, their financial behaviour is not at a satisfactory level (Arthasad & Rajapakse, 2018).
Hence financial literacy in Sri Lanka appears to be in short supply among these groups.
Examining yet another crucial group, Professionals are usually trained manpower who are welleducated.They contribute to the Economy in different fields such as Education, Management, Engineering, Medical field, IT, Logistics, Aviation, Navigation, etc.They make possible solutions to a problem aiming to maximize the resources available with the goal of effectiveness and efficiency at the forefront.Hence their financial sophistication drives shaping not only their lives as individuals but the overall economy.It might be the general norm that professionals are financially literate.However, Anderson et al. (2017)  executive officers, and chief operating officers) respond negatively to the given financial literacy questions.Acharya and Mittal (2019) state that women professionals' financial literacy is not at a satisfactory level in Jaipur, India.Hence it is a disruption to Economic empowerment.Gačić et al. (2023) state that financial competency among the managers in Serbian healthcare institutions is relatively at a modest level.However, they engage in financial activities at large.Hence the gap between their knowledge and how they function may harm the wellbeing and the sustainable growth of the organizations.Therefore, professionals' financial competency is a strength to the growth of institutions and the Economy as a whole.Yet as a leading group in Sri Lanka, there is no single study undertaken to capture the financial soundness of professionals.The Advocacy chair of the CFA Society Sri Lanka, Mr. Ravi Abeysuriya states that financial literacy is not confined to the poor but may be common among professionals as well (Jayasuriya, 2019).
However, there is no published evidence to support this argument.Hence the interest of this study lies in capturing that dearth and closing the gap.
Hence the study aims to: 1. Measure the level of financial literacy among professionals (Is it fairly good or not?)

2.
Examine the determinants of financial literacy among professionals.

Theoretical view
There are numerous theories identifying the households' behaviour that influences financial decisions such as saving, borrowing, and investing.Expected Utility Theory (Neumann & Morgenstern, 1953), Portfolio theory (Markovitz, 1952;Markovitz, 1959), Life cycle hypothesis (Modigliani & Brumberge, 1954), Permanent Income Hypothesis (Friedman, 1957), and the Efficient Market Hypothesis (Fama, 1991) on the basis which follows rational finances under the assumption that humans are rational, and their main goal is profit maximization.Friedman (1966) has indicated that the rational behavior of investors is that decisions are made based on the evidence of mathematical calculations and interpretations.
International Journal of Accounting & Business Finance Vol.9, No.2, December 2023 Issue. pp. 45-73 Eventually, the behavioural finance theory developed later by Kahneman and Tversky (1979), Thaler (1985), Ritter (2003), andBaker (2010) recognized investment decisions of individuals are not completely rational but considered Socio-Economic phenomena.Financially literate individuals make decisions not purely on numeracy but on general mental capability (Cognitive ability), habits, ethics, and their sentiment toward financial markets.Hence "financial literacy" consistently falls under the theory of behavioral finance.

Empirical evidence on financial literacy and its importance
There are shreds of evidence suggesting that financial literacy is one of the key determinants of financial well-being (Panos & Wilson, 2020).It appears to be crucial to have a sufficient degree of financial competency with the rapid transformation of financial markets with intricate financial products (Lusardi, 2019).If not, financial illiteracy has the potential of making poor financial decisions and adversely influences on physical, psychological, and family well-being of individuals as well (Lone & Bhat, 2022;Ryu & Fan, 2022).
Examining the professionals' financial literacy around the globe, particularly in emerging markets and developed countries, few studies look at that facet.Shaik et al. (2022) stated that In India, the IT sector plays a vital role, hence enhancing the financial education of IT professionals will result in more investments in supporting Economic development.However, Yadav and Seth (2022) indicated that Indian professionals are investing more than businesspeople and are financially sound.Acharya and Mittal (2019) stated that women professionals' financial literacy is not at a satisfactory level in Jaipur, India.Hence it is a disruption to Economic empowerment.
In South Africa, professional athletes need to gain a high level of financial literacy to accumulate their wealth in the form of investments (Moolman, 2020).A systematic literature review undertaken by Compen et al. (2019)  Hence their lack of knowledge may harm organizational performance.Thus, the financial literacy of professionals is closely linked to not only their personal growth but also institutional performance, investments, and Economic empowerment.
In terms of the Sri Lankan context, surveys have been conducted among different population groups as mentioned in the Introduction part of the study such as investors (Tennekoon & Liyanage, 2021), entrepreneurs (Kumari et al., 2021), rural communities (Karunathilaka, 2016; Weerasinghe & Jayasinghe, 2022), University students (Priyadarshani & Kumari, 2021;Edirisinghe et al., 2017) and among the academics (Arthasad & Rajapakse, 2018).However, there is no single study that captures the financial literacy of professionals, though they are key strategic decision-makers in the country.Thus, the first hypothesis is developed as: H1 -The level of financial literacy of professionals is at a satisfactory level.

Empirical evidence on financial literacy and its measurements
Existing literature indicates that financial literacy is often an entry model for financial education.
Measuring financial literacy is critical to identify the implications for education and disruptions related to sound financial decision-making (Huston, 2010).Financial literacy questions consist of two parts.Basic financial literacy and advanced financial literacy (Rooji et al., 2011;OECD, 2011).Basic financial literacy covers topics such as Nominal and real values, compounding and the discounting process, interest rates, and Inflation.The areas such as the difference between stocks and bonds, functions of stock markets, risk diversification, and the relationship between bond prices and interest rates are covered by Advanced financial literacy (Rooji et al., 2011;Lusardi & Mitchell, 2005;Hung et al., 2009).

Empirical evidence on the determinants of financial literacy
Arthasad and Rajapakse (2018) stated that the financial literacy of males is higher than females.Lusardi (2007) highlighted in her study on "Household savings behaviour" that gender is significantly influencing financial literacy.Hung et al. (2009) explored that men in the United States are more financially literate than women.Sarpong (2021), also mentioned that young and old women in Ghana perform worst on financial literacy measures.Based on the empirical findings, the second hypothesis is developed as: International Journal of Accounting & Business Finance Vol.9, No.2, December 2023 Issue.pp.45-73 H2: The gender of professionals significantly influences financial literacy.
Financial literacy differs substantially with age.It is low among the young and old and high among the middle age (Rooji et al., 2011).Agarwal et al. (2009) indicated that middle-aged adults make fewer financial mistakes than either young or old adults.The results were in line with Hogarth (2002) who has explored that less financially knowledgeable are either young or old (Not middle age).Hence the financial decisions of individuals may differ over their life cycle.Hence the third hypothesis can be developed as: H3: The age of professionals significantly influences financial literacy.Mouna and Anis (2016) found that employment status influences the assessment of the financial literacy of Tunisian citizens and is significantly different among self-employed, public-sector, and private-sector workers.The unemployed are highly financially illiterate.The outcomes align with Lusardi (2007), Calvet et al. (2009), and Bhushan and Medury (2013).Based on the findings, the hypothesis is developed as: H4 -The employment field of professionals significantly influences financial literacy.Karunathilaka (2016) and Janor et al. (2016) found that financial literacy is positively connected with the income of individuals.Those who are financially literate have a higher income and they can withstand sudden financial pressures (Sarpong, 2021;Ansari et al., 2023).Hence the fifth hypothesis can be developed as: H5: The income of the professionals positively and significantly influences financial literacy.
Financial competence changes with professional experience.Lack of experience influences overindebtedness (Lusardi & Peter, 2009).Beal and Delpachithra (2003) explored that financial literacy scores are more likely to come from men with more work experience.Based on the empirical results, the sixth hypothesis is developed as: H6 -The work experience of the professionals positively and significantly influences financial literacy.
Financial literacy is influenced by Economic and financial education and how often that knowledge is applied (Lusardi & Mitchell, 2005) Mouna and Anis (2016) explored a close connection between economic education and financial literacy.Therefore, economic and financial education is considered in this study as one of the principal independent variables.Hence the seventh hypothesis is developed as: H7 -Economic and financial education positively and significantly influences financial literacy.
Bhargava and Mittal (2017) stated that there is a strong impact of analytical skills on financial literacy.The numeracy and research skills of a person affect their financial decisions remarkably.
Those who lack self-efficacy will not be able to withstand financial market downsizing and take advantage of an upswing (Hung et al., 2009;De Bassa Scheresberg, 2013;Skagerlund et al., 2018).Based on the literature, the eighth hypothesis is developed.
H8 -Self-analytical skills positively and significantly influence financial literacy.
Bhargava and Mittal (2017) investigated that, having financial goals such as future self and family protection concepts like insurance, tax planning, EMIs (Equivalent Monthly Installments) on vehicle and housing loans, etc. leads to more financial sophistication.Lusardi and Mitchell (2008) indicated that individuals who have future financial plans such as a retirement plan or a savings plan are more financially knowledgeable than others.Hence the following hypothesis is developed.
H9 -Future financial goals positively and significantly influence financial literacy.

Methodology
According

Measurement and the operationalization of variables
A quantitative approach was implemented in this study.Data was collected through a structured questionnaire as the objective data can be communicated through statistics and numbers.when the population is known, yet data can be collected from each stratum by giving an equal weightage, which is very effective in reducing the standard errors of accuracy (Tyrer & Heyman, 2016).Fifteen responses were removed due to missing data.

Econometric tests and models
The reliability of the primary data was checked using Cronbach's alpha for independent and dependent variables.and 79% financial literacy level can be considered as medium.If it ranges between 80% and 100% financial literacy level is high (Bhushan & Medury, 2013;Arthasad & Rajapakse, 2018).
Principal component analysis was used to measure the independent variables, Economic and financial education, and future financial goals.The third independent variable, self-analytical skills was measured using numerical questions scored from 0 to 100 points.

Karl Pearson Correlation analysis was used to analyze the relationship between the independent variables and the dependent variable.
To analyze the determinants of financial literacy, the second objective, linear regression analysis was performed.

Results
The reliability of the primary data collected was checked using Cronbach's alpha.The statistics in Table 3 report that the internal consistency of the entire data set and each variable was at an acceptable level.H0: Financial literacy among professionals is not at a satisfactory level.
H1: Financial literacy among professionals is at a satisfactory level.
One Way ANOVA test results in Table 5 depict that the financial literacy of professionals is at a medium level (The mean score for financial literacy questions is 65%).Therefore, H1 can be accepted.H2 -The gender of professionals significantly influences financial literacy.
Table 07 reports a coefficient of 2.363 for overall financial literacy, which is not significant.The results depict that gender does not influence professionals' financial literacy.Therefore, the alternative hypothesis is rejected.The results do not support the existing literature indicating that male financial literacy is higher than females (Arthasad & Rajapakse, 2018;Sarpong, 2021).
H3 -The age of professionals significantly influences financial literacy.
H4 -The employment field of professionals significantly influences financial literacy.
Being a professional in medicine, engineering, law, aviation, and navigation leads reducing the level of overall financial literacy by 26.5, 9.62, 20.09, and 17.07 points respectively.The highest negative coefficients can be seen in the fields of medicine and law.Advanced financial literacy reduction is even bigger.All the coefficients are significant.It depicts that those who are employed in non-management fields show a financial literacy not at a satisfactory level, especially among doctors and lawyers.
H5 -The income of the professionals positively and significantly influences financial literacy.
Table 07 depicts that monthly income is significantly influenced by financial literacy.Hence the alternative hypothesis is accepted, and the results support the existing literature (Karunathilaka, 2016;Janor et.al., 2016;Sarpong, 2021;Ansari et al., 2023) International Journal of Accounting & Business Finance Vol.9, No.2, December 2023 Issue.pp.45-73 H6 -The work experience of the professionals positively and significantly influences financial literacy.
Work experience showed a multicollinearity issue.Hence, the variable was not taken into the OLS model.
H7 -Economic and financial education positively and significantly influences financial literacy.
The coefficients of 1.748 for overall financial literacy and for advanced financial literacy, Economic, and financial education show a positive significant impact on financial literacy.
H8 -Self-analytical skills positively and significantly influence financial literacy.
With a coefficient of 0.201 in Table 07 which is significant, Self-analytical skills show a positive influence on financial literacy.Hence the alternative hypothesis is accepted, and the results support the existing literature (Bhargava & Mittal, 2017;Banks & Old Field, 2007;De Bassa Scheresberg, 2013).
H9 -Future financial goals positively and significantly influence financial literacy.
Table 07 reports that future financial goals do not have a significant impact on professionals' financial literacy.Hence, the alternative hypothesis is rejected.The results do not support the existing literature depicting that financial literacy is increased with more financial goals (Bhargava & Mittal, 2017;Banks & Old Field, 2007).

Discussion
Research Findings and the  (Lusardi, 2019;Acharya & Mittal, 2019;Compen et al., 2019), lack awareness of new financial products (Yadav & Seth, 2022), and are reluctant to accept financial advice (Anderson et al., 2017), leading them to make misleading decisions on investment.
Research Findings and the discussion on Objective two: Determinants of financial literacy The results generated in the linear regression model emphasize that the field of employment, monthly income, and the age of the respondents as demographic variables have a significant influence on financial literacy.Generally, male financial literacy is higher than females (Arthasad & Rajapakse, 2018;Rooji et al., 2011).However, in the study, gender didn't show a significant influence.Being a person with a high income and in middle age leads to more financial sophistication (Hogarth, 2002;Agarwal et al., 2009;Karunathilaka, 2016;Janor et al., 2016;Sarpong, 2021;Ansari et al., 2023).Apart from demographic variables, economic and financial education, and self-analytical skills were found to be significant determinants of financial literacy, supporting the existing literature.There is a sizable and growing literature that establishes a correlation between economic and financial education with financial literacy (Altman, 2012;Sucuahi, 2013;Rooji et al., 2011;Mouna & Anis, 2016;).Further individuals with greater ability in numerical analytical calculations also tend to have a higher level of financial literacy (Bhargava & Mittal, 2017;Banks & Old Field, 2007;De Bassa Scheresberg, 2013).

Conclusion and Recommendation
The analysis concludes that the financial literacy of professionals is at a moderate phase.
However, when further categorized by profession, doctors, and lawyers demonstrated a low level of financial literacy.In addition to demographic variables, Economic and financial education as well as self-analytical skills do have a significant impact.In Sri Lanka, the school curriculum prioritizes numerical education for students from primary schooling onwards.Somehow Figure 1.Conceptual Framework Source: Author constructed The target population of the study was identified as professionals in the corporate sector from the professions of biology/medicine (doctors), engineering (engineers), law (lawyers), management (managers), and aviation and navigation (captains and pilots) in Colombo District, Sri Lanka.International Journal of Accounting & Business FinanceVol.9,No.2, December 2023 Issue.pp.45-733.4.Sampling designA cross-sectional research design was employed.The sample in this study was a subset of professionals in the Colombo district as it has the highest employability in the service sector (Annual labour force survey, 2020).However, the number of professionals in the Colombo district was not specified and given as a figure.Nationwide, it was 7% of the Employed population by occupation.Therefore, in this study, 7% was multiplied four times to Colombo district as 28%, and the sample size was calculated as 300 based on Cochran'level at 95% (standard value of 1.96) p = estimated prevalence of the variable of interest (e.g., 28% or 0.28 of the population are professionals) m = margin of error at 5% (standard value of 0sampling technique, targeting more than 50 professionals from each industry, data were collected from 315 respondents via a structured questionnaire in collaboration with two major hospitals, The National Hospital of Sri Lanka and Kalubowila Teaching Hospital, Two major courts, Aluthkade and Kaduwela court complexes, Institution of engineers, Colombo International Nautical and Engineering College, Bandaranayake International airport and the Institute of chartered professional managers, located in major divisional secretariats in Colombo.Although probability sampling techniques are generally used economic and financial education is touched by the limited number of students studying commerce subjects and by management undergraduates.Therefore, low financial literacy in nonmanagement fields is possible.It is therefore recommended to improve school curricula including economic and financial education with a view of personal financial management.AInternational Journal of Accounting & Business FinanceVol.9,No.2, December 2023 Issue.pp.45-73 significant number of credits for economic and financial education can be allocated to medical and law undergraduates because the highest coefficient of reducing financial literacy is shown in these two fields.Currently, the Organization for Economic Corporation and Development (OECD) and even our neighbouring country India have implemented national strategies to improve financial education as financially educated citizens can create positive effects on the overall economy (OECD, 2015).Hence the Central Bank of Sri Lanka (CBSL), Securities and Exchange Commission (SEC), professional accountancy bodies, and even public/private financial institutions of Sri Lanka have a great responsibility for implementing a strategy to promote financial literacy and enhance financial sophistication.International Journal of Accounting & Business Finance Vol.9, No.2, December 2023 Issue.pp.45-73 Altman (2012))also demonstrated how International Journal of Accounting & Business Finance Vol.9, No.2, December 2023 Issue.pp.45-73 financial education aids people in making better decisions when they focus on "specialized knowledge of financial issues, markets, and products".Sucuahi (2013) indicated that the microentrepreneurs in Davao City are not financially literate due to a lack of financial education.

Table 1 :
Measurement and the operationalization of variables

Table 2 :
Reliability test results Albeerdy, and Gharleghi (2015) (2015)ONE-WAY ANOVA was used to test the Overall, Basic, and Advanced financial literacy of professionals to measure the first objective of the survey.Based on the test results, if the mean mark is below 60%, financial literacy is at a low level.If the mean marks range between 60%

Table 3 .
Reliability Statistics

Table 4 :
Research sample descriptive statistics Note: FL; Financial Literacy, BFL; Basic Financial Literacy, AFL; Advanced Financial Literacy, EFE; Economic and Financial Education, FFG; Future Financial goals, SAS; Self-Analytical Skills Source: Primary Data The primary goal of the study was to gauge financial literacy.The test results in Table4show the mean overall financial literacy score of doctors, lawyers, and those who work in the navigation and aviation sectors is less than 60%, indicating a low level of financial literacy.The mean score for engineers and managers ranges from 60% to 79%, indicating that their financial literacy is at a medium level.Though the basic financial literacy of professionals in all professions is at a medium to a high level, advanced financial literacy among doctors, lawyers, and those who work in aviation and navigation fields is at a low level.International Journal of Accounting & Business Finance is accessible at http://www.maco.jfn.ac.lk/ijabf/ 59

Table 5 :
One Way ANOVA test results of financial literacy

Table 6 :
Correlation between Financial literacy and independent variables

Hypothesis test on objective 02
Table 07 reports negative coefficients for all age categories.-5.745 for the age category of 28-36 years, -11.180 for the age category 37-46 years, and -10.665 for the age category above 46 years and significant (P<0.1).Hence, the alternative hypothesis is accepted.However, the results do not support the existing literature indicating that financial literacy level is high in middle age

Discussion of Objective One: Is financial literacy among professionals at a satisfactory level?
professionals in non-management fields (reached less than 60 %).Financial competence is at a low level, especially in the fields of medicine and law.This results from a deficiency in economic and financial education.The studies conducted worldwide still state that many