The effect of company brand on the investment decisions of individual investors as mediated by behavioural finance biases in Nigeria

Over the years, the financial sphere and its systematic process has transcended from one paradigm to another. Most prominent is the traditional finance paradigm dominating the financial sphere majorly throughout the 1960s and 1970s. The ideology and the foundation of the traditional finance paradigm was centred on the concept of rationality. Within the context of the current research, the traditional finance paradigm postulates that individuals in the process of making investment decisions, acquire and analyse all available information in the stock markets, upon which they make a rational investment decision. In other words, the traditional finance paradigm portrays individuals as perfectly informed, rational decision makers, capable of objectively solving complex problems –Homo economicus. However, research in the field of psychology gave rise to the questions and concerns that started to emerge in the 1980s concerning the realistic nature of the assumptions of the traditional finance paradigm. As opposed to the assumptions of traditional finance, these research show that it is impossible for investors to analyse the shares of all the listed companies in the market in order to make rational investment decisions due to the ambiguous nature of information available. In the behavioural finance paradigm individuals’ decision making are viewed to incorporate factors such as emotions, heuristics, experiences, intuition and perceptions. These factors in turn are seen to induce biases (such as availability bias and overconfidence) which leads to subjective decision making. The concept of behavioural finance is based on realistic outcomes of events in the financial sphere for example, the repeated occurrence of financial crises in an environment where all participants are assumed to be rational. The behavioural finance paradigm challenges the assumption of the traditional finance paradigm which is embedded on the concept of rationality. The purpose of the present research is to investigate whether brands of listed companies on the Nigerian Stock Exchange trigger behavioural finance biases in investment decisions of individual investors in Nigeria. More specifically, the aim of the present research was to establish relationships between the independent sub-variables of brand knowledge (brand awareness and brand image) and brand relationship (brand loyalty and brand attachment), the mediating sub-variables of behavioural finance biases (availability bias and overconfidence) and the dependent variable (investment decisions). To this end, objectives and hypotheses were formulated to guide the research. In order to achieve the stated objectives and test the formulated hypotheses, the present research adopted the positivistic paradigm and the methodological process involved quantitative methods. Data was acquired by means of an online questionnaire from members of the Independent shareholders association of Nigeria and individual investors whose contacts were provided by an independent broker (n= 182). The research instrument showed satisfactory levels of validity on all measures (between 0.40 and 0.89) and a relatively highly internal consistency for reliability with Cronbach’s alpha coefficient scores of between 0.81 and 0.93. Descriptive and inferential statistical analyses were performed. Descriptive statistics involved frequency distribution, mean and standard deviation. Inferential statistics involved Spearman’s rank correlation coefficient, Multiple linear regression analyses, T-test and ANOVA. Using Spearman’s rank correlation coefficient, results show that all variables were positively correlated. Results of the Multiple linear regression analyses performed, indicated that there are positive relationships between brand awareness and investment decisions; brand awareness and availability bias; brand loyalty and investment decisions; brand loyalty and overconfidence; overconfidence and investment decisions. Furthermore, Multiple linear regression analyses also indicated that availability bias mediates the relationship between brand awareness and investment decisions; and overconfidence mediates the relationship between brand loyalty and investment decisions. Results of the T-test indicated that there is no significant mean difference found in the responses of the different sex group (male and female) on independent, mediating and dependent variables. While ANOVA indicated that there is a significant difference found between the age category of respondents and brand loyalty; age category of respondents and investment decisions. Based on the results of the analyses performed, conclusions, contributions and recommendations were enumerated. Practical recommendations were made to the government, individual investors, companies and brand experts, professional brokers, financial analysts and economy developers