A decomposed theory of reasoned action to explain intention to use Internet stock trading among Malaysian investors
Introduction
The proliferation of the Internet has radically transformed the offering of online financial services by banks and financial firms. The natural extension of e-commerce in the securities market is Internet-based stock trading and securities services. Investors would now be able to acquire or sell shares or stocks from anywhere by just using Internet-based order submission protocols. Real-time stock prices and monitoring, portfolio management, various kinds of financial planning, and information which is available 24-h a day are just but a few services that can be accessed by using a Web-based interface. Internet stock trading is one of the fastest growing e-finance areas, with South Korea being the current leader not only Asia but possibily worldwide with up to 60% of trades conducted online (Lee & Ho, 2002).
Online stock trading was embraced in Malaysia in 1995, whereby the Kuala Lumpur Stock Exchange or currently known as Bursa Malaysia launched the Electronic Client Ordering System. This is an electronic means for stock broking firms to route orders from clients through proprietary or open system to the Malaysian stock exchange. A proprietary system is a system whereby the users can dial up into the stockbroker’s intranet to convey the transactions that need to be done. However the concept of online trading has not been well received as there were only few stock broking firms that offered online trading services.
Online stock trading in Malaysia is not an open system as that is being practiced in foreign countries such as Singapore. Online stock trading in Malaysia can only be done through remisiers. Unlike most countries that provide online stock trading, in Malaysia, orders that are keyed in are not conveyed directly to the exchanges but goes through a broker’s front-end system.
Although online stock trading has been available in Malaysia for more than a decade, it has not yet taken off in a big way among local retail investors. In a recent report (Sani, 2005), only 2% of the total retail securities traded on the Malaysian Stock Exchange comes through the Internet. This is a poor comparison with other countries in the Asia Pacific region such as South Korea and Japan where the Internet stock trading constitutes around 80% of the total retail securities trades. When compared to our closest neighbors, namely Singapore and Hong Kong, total turnover on their respective stock exchange done online is higher at around 8–10%.
Previous research have studied online stock trading using two approaches. The first one focused on cross-sectional data in which investors’ investment characteristics and psychological makeup were examined after their adoption of online trading. There is a weakness in this approach since it is plausible that investors change their investment behavior and psychology in response to the new environment of online trading. For example, as a result of going on-line, it may increase investors’ propensity to trade. This may result in investors’ profit decline triggering a change to their investment risk propensity. Thus, it is difficult to tell which factors cause investors to adopt online trading, or whether the resultant experience in online trading alters investors’ behavior and psychology. The second approach focuses on investors’ intention to adopt online trading (Li, Lee, & Cude, 2002).
This study integrates these two different approaches of adoption factors by grouping these two groups (those who have experienced online trading and those who have not) as a single entity. This approach is based on the following assumption: both groups have the same level of perceived risk in intention to adopt online trading. This study focuses on examining and identifying the factors that influence investor’s intention to use the online stock trading based on an extended version of the Theory of Reasoned Action (TRA) (Fishbein & Ajzen, 1975). Unlike past studies that focused solely on individual internal motives (in term of usefulness and ease of use, derived from the Technology Acceptance Model), this study is conducted with the purpose to: (i) study a new technology that has received less attention in Malaysia (Internet stock trading); (ii) study the potential impact/role played by culture to increase the intention to adopt this new technology, and (iii) assess the applicability of an extension Theory of Reasoned Action (TRA) model. Culture is studied through the social norms and attitudinal variables, derived from the TRA. According to the four dimensions of culture by Hofstede G. (2009), Malaysia is a collectivist culture compared to Western society. In collectivist cultures, social norms are highly valued and are expected to play an important role. Hence, social norms need to be decomposed in order to get more insight about the researched phenomena.
This study is useful since it will suggest guidelines for online stock broking organizations in understanding the cultural factors that encourage and increase online stock trading adoption among current and potential retail investors and provide strategies on how to increase the adoption in a collectivist culture.
Background of the research model and the generation of hypotheses will be discussed in next section. Section 3 describes the employed research methodology. Section 4 presents results and discussion. The last section concludes the research and points to relevant implications useful to both practice and research.
Section snippets
Literature review related to Internet stock trading
Ecommerce is defined as the process of buying and selling over the Internet. The process entail a variety of online transactions such as electronic retailing, online banking, electronic tourism, and Internet stock trading. While ecommerce received lot of attention in developed countries, it has remained sparse in developing countries. A complete literature review about the issue can be found in Rouibah, Khalil, and Hassanien (2009). While ecommerce received less attention, studies that focused
Sample and procedure
A structured questionnaire using 7-point Likert type scale was employed to gather data for the constructs proposed in the research model. This study target two groups: individuals in Malaysia who have conducted trading, i.e. those who buy and sell of stocks for personal investment, as well as those who are aware of Internet stock trading in the Bursa Saham Malaysia. The research site for this study is brokerage houses in Penang. This is a cross-sectional study for which data was gathered once
Research findings
After the factor analysis, multiple regression analysis were carried to determine the relationship between the independent and the dependent variable of the model. For this purpose, three stage regressions were run successively for attitude, subjective norms, and behavioral intention BI.
Discussion
This study has shown that attitude towards behavior and subjective norm have a direct significant positive relationship with behavioral intention to use Internet stock trading. The direct positive relationship of attitude and subjective norm is in line with prior research conducted by Fishbein and Ajzen, 1975, Taylor and Todd, 1995, Mathieson, 1991, Bhattacherjee, 2000, Ajzen, 1991, Ajzen, 2002, Ramayah et al., 2002, Ma’ruf et al., 2003, Eri (2004), May, 2005, Athiyaman, 2002, and Gopi and
Conclusion
The main objective of this study is to identify the factors that are involved in influencing intention on using Internet stock trading. From the findings it has been identified that attitude and subjective norm significantly influence investor’s behavioral intention towards using Internet stock trading. The decomposed variable also showed significant relationship towards belief structure. From the practical view point, this study has explained the factors that influence the intention to use
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