“How does risk aversion shape investors’ intentions? Evidence from the Indian corporate bond market”

Risk aversion plays a crucial role in understanding how individuals make financial decisions and allocate their resources. This study analyzes the influence of risk aversion on behavioral intentions and explores the mediating role of attitudes, subjective norms, and perceived behavioral control. Additionally, it investigates the moderating effect of gender and financial literacy on behavioral intentions of investors. A sample of 400 people was collected from Indian retail investors by administering a structured questionnaire through stock brokering firms


INTRODUCTION
A deep-rooted corporate bond market is essential for the stabilized financial system and sustainable development of the economy.It reduces the reliance on external borrowings and credit default risk by ensuring diversified financial requirements as well as efficient allocation of funds (Gupta, 2020).In comparison to global bond markets, the Indian corporate bond market is still in its infancy.The corporate bond market to GDP ratio is 18% in India, whereas in the USA, 123.47%,South Korea, 74.03%, Brazil 99.05%, and Turkey, 142.06%.It has been reasoned out in reports that a substantial proportion of private placement, lack of investor awareness and transparency, and absence of unified and effective trading mechanisms, and liquid funds caused low retail participation and underdevelopment of the Indian corporate bond market (Acharya, 2011;Gwalani & Bharati, 2015).A diversified investor base is essential to reduce capital erosion and credit default risk in the corporate bond market, as the risk of the investment will be shared among a large number of investors (Nandan & Saurabh, 2016).It is imperative to study the factors that influence market participation and the underlying causes of individuals' avoidance of participating in the bond market.It has been demonstrated that individual psychological factors such as investors' preferences, beliefs, and psychological biases significantly influence stock market participation (Luotonen, 2009).
Investors' decision making has been approached from the economic viewpoint, which advocates that the individual is rational in decision making.Nevertheless, recent studies in behavioral finance argued that individuals do not act rationally and exhibit irrational behavior in decision making.These have been guided by several psychological and cognitive biases (Lacalle, 2018).Prospect theory describes that the individual's decision-making process predicts that people are more risk-averse when it comes to avoiding losses than they are when it comes to making gains.It has been observed that risk aversion is inversely associated with stock market participation (Mayfield et al., 2008) and positively associated with fixed-income avenues such as bonds and deposits (Grable & Lytton, 2003).Hence, it is believed as an important factor in studying investor behavior.Recent evidence demonstrates that behavioral intention and investment behavior are extensively investigated in the context of the equity segment.However, studies have failed to examine the inventors' intention to invest in the corporate bond market.
The prior work has examined the indirect relationship between risk aversion and intention through attitude, subjective norms and PBC and evidenced inconclusive results (Raut, 2020;Mulyono, 2021).It is important to note that there is limited research exploring the role of intermediary variables between investors' risk aversion and their behavioral intentions.Studies have also highlighted a significant gap in investigating gender and financial literacy as potential categorical moderators.Consequently, this study sought to answer whether risk aversion influences the behavioral intention of investors.Further, do attitude, subjective norms, and perceived behavioral control mediate the relationship between risk aversion and behavioral intention?Finally, does financial literacy and gender moderate the proposed relationships?Hence, this study is designed to empirically gain insights on factors shaping investors' intentions and their preferences towards the corporate bond market within the realm of finance.

LITERATURE REVIEW AND HYPOTHESES
The study utilizes the theory of planned behavior (TPB) (Ajzen, 1991) and prospect theory (Kahneman & Tversky, 1979) to formulate the prediction about investors' intentions towards the Indian corporate bond market.The prospect theory argues that individuals' decisions are not always rational as they consider gains and losses differently.It provides an accurate decision model to decision makers when risk is involved.It states that "people engage in decision-making based on the potential value of losses and gains rather than the outcome, i.e., individuals dislike losing more than winning".Risk aversion implies that investors behave in such a way as to minimize losses, as losses seem larger than gains, even though the probability of those losses are small.TPB (Ajzen, 1991) is considered as a prominent theory in predicting and explaining individuals' behavior.TPB is an extension of the "Theory of Reasoned Action" (Ajzen & Fishbein, 1980).The theory proposes that intention and perceived behavioral control (PBC) are the foremost antecedents of behavior (Ajzen, 1991;Ajzen & Fishbein, 2000).The intention of an individual is determined by three antecedents, i.e., subjective norms (SN), attitude (AT), and PBC.The study by Grable and Lytton (2003) found that risk tolerance positively impacted the intention to invest in equity-related avenues and negatively influenced fixed-income investments such as bonds and cash ownership.A study investigating the impact of risk tolerance on investors' intention toward stocks and securities reported that investors who are less risk-averse or risk-tolerant tend to invest in stocks in the context of Kazakhstan (Pak & Mahmood, 2015).Evidence presented suggests that risk aversion positively impacts stock market participation (Xu, 2018).
Attitude towards behavior denotes "the extent to which an individual has a favorable or negative evaluation of the target behavior or favorable or unfavorable belief towards behavior" (Fishbein & Ajzen, 1975

METHODS
The study examines the influence of risk aversion on the behavioral intention of retail investors to invest in corporate bonds.The primary data were obtained from retail investors from the Indian stock market through a structured questionnaire.The minimum sample size was determined using the 10-times rule of thumb (Hair et  to evaluate the discriminant validity.Structural relationships between latent variables were assessed using the path coefficient values, the explanatory power of exogenous variables with the help of R 2 and predictive relevance using Q 2 values.Further, mediation analysis of AT, SN, and PBC was done by comparing the specific indirect effect and direct effects of the paths.In addition, multi-group analysis (PLS-MGA) was performed to examine the moderating effect of financial literacy and gender as these factors are categorical in nature.As a prerequisite to the PLS-MGA, measurement invariance was confirmed using the MICOM (Measurement Invariance of Composite Models), which includes the configural invariance, compositional invariance, and equal means and variances assessment.Validity measures the accuracy of the measure.It is classified as convergent and discriminant validity.Average variance extracted scores were used to measure the convergent validity.An AVE score equal to or greater than 0.5 is considered as acceptable.Table 3 indicates the AVE score higher than 0.5 for all the latent variables in the model.Therefore, convergent validity was established.Discriminant validity measures the distinctiveness of the constructs in the model.Fornell-Lacker and HTMT ratio were applied to verify the discriminant validity.Fornell-Lacker criterion compares the square root of AVE values with the correlation of the variables.The square root of AVE values is greater than the correlation of the variables in Table 2. Therefore, discriminant validity is established.Furthermore, the HTMT ratio is considered a more robust method to verify the discriminant validity.A value of more than 0.9 is considered as an absence of discriminant validity.Table 4 indicates that the HTMT ratio values are less than 0.9 for all the latent variables.Hence, discriminant validity is acceptable.Table 5 shows the coefficient values of structurrelationships.The path coefficient values were extracted using the PLS bootstrapping method, which bootstraps the current sample to 5,000 samples.Risk aversion has a positive impact on the behavioral intention of the investors towards the Indian corporate bond market (β 0.082*) at a 5% level of significance.Similarly, the constructs equivalence (identical indicators and scales of constructs across the groups), (b) confirming uniform data treatment i.e., coding, reverse coding, recording, across the groups, and (c) maintaining the identical algorithm setting and optimization criteria.In the current analysis, all the requirements for gender (Table 7) and financial literacy (Table 8) are fulfilled.Hence, configural invariance is established for the subgroups such as gender and financial literacy.The results of compositional invariance are extracted from step 2 of the MICOM procedure.In Tables 7 and 8, composite scores are within the range of the 5% quantile and 1.Therefore, there is compositional invariance for the groups gender and financial literacy.The establishment of configural and compositional invariance is referred to as the establishment of par-   8  and 9 exhibit that the difference of the composite scores lies between the lower and upper boundaries at a 95% confidence interval.Hence, full invariance is established for the groups gender and financial literacy.

Fornell
Table 9 exhibits the results of a multi-group analysis of gender (H 6 ).Gender was studied as a moderator, which was categorized as male and female.Hensler's MGA and permutation test methods were employed to assess the moderating effect of gender.As per this method, the p-values of the path coefficient difference lower than 0.05 imply significant differences between specific path coefficients across two groups at 5% significance (Henseler et al., 2009;Sarstedt et al., 2011).
According to the permutation test, a p-value of the path coefficient is lower than 0.05 regarded as significant.The p-value of Hensler's MGA and permutation test for the path coefficient difference (-0.187*) for the relationship between PBC and intention were less than 0.05.This implies the significant difference in the impact of PBC (-0.187*) on BIT between male and female groups.The positive impact of PBC on the behavioral intention was stronger for female investors than males.In contrast, there is no significant difference in the relationship between risk aversion, attitude, subjective norms, and intention.
The findings of the MGA of financial literacy are shown in Table 10 (H 7 ).Financial literacy is categorized as advanced and basic financial literacy.Hensler's MGA and permutation test p-values were less than 0.05 for the relationship between attitude and intention, and risk aversion and PBC.The positive impact of attitude on behavioral intention is stronger among investors with an advanced financial literacy level.Therefore, advanced financial literacy significantly moderates the relationship between attitude and intention.Likewise, the positive association between risk aversion and PBC was stronger among investors with basic financial literacy.Basic financial literacy moderates the relationship between risk aversion and PBC.Financial literacy did not moderate the relationship between subjective norms, risk aversion and intention.

DISCUSSION
Initially, the study examined the impact of risk aversion on the behavioral intention of investors.Further, the study explored the moderating role of gender and financial literacy using PLS-MGA.The study found that the impact of risk aversion on investors' decision making did not differ based on gender.Gender did not moderate the relationship between risk aversion and intention.The results are inconsistent with the findings of Keller and Siegrist (2006), Barasinska et al. (2009), Montford and Goldsmith (2015), Dickason and Ferreira (2018), and Lawrenson and Dickason-Koekemoer (2020), which revealed that female investors are more risk-averse and choose the less risk associated investments than male investors.Moreover, the study found that financial literacy did not moderate the relationship between risk aversion and behavioral intention.These results were in line with the findings of Dinç Aydemir and Aren (2017) and Sadiq and Khan (2019).These findings suggest that, in general, gender and financial literacy neither strengthen nor weaken the association between risk aversion and intention.

CONCLUSION
The study investigated the impact of risk aversion on the behavioral intention applying the TPB.Additionally, mediation analysis of attitude, subjective norms and PBC, and multi-group moderating analysis of gender and financial literacy were conducted.The structural equation modelling revealed that risk aversion, attitude, subjective norms, and PBC significantly positively impact the investor's intention.The second major finding was that attitude, subjective norms, and PBC partially mediate the relationship between risk aversion and intention.Furthermore, the multi-group analysis revealed that gender and financial literacy did not moderate the association between risk aversion and intention.
Based on findings, this study suggests that a key policy priority should be to plan for the long-term development of the corporate bond market in India from an investor's perspective.To develop a favorable attitude towards the Indian corporate bond market, regulatory bodies and policymakers should regulate the transparent and liquid debt market.This ensures easy access of the information to the investor.Furthermore, to ensure easy access of the information to the investor, regulatory bodies and corporate houses should publish well-informed reports and media reports to create an affirmative perception towards the corporate bond market.To increase the investors' perception of their ability to invest in the corporate bond market, the government and policymakers can build a fair and transparent investment avenue, regulated trading mechanism, technological infrastructure, and tax concessions.Additionally, corporate and regulatory bodies can develop attractive investment avenues like ETFs, increasing retail investors' participation.This study's scope was limited when evaluating the multi-group analysis of age and financial literacy.Hence, future research can explore other demographics such as age, education, and trading experiences.Additionally, longitudinal research needs to be carried out to examine the translation of the behavioral intention to the actual behavior of the investor.
(Hung et al., 2009;Lusardi et al., 2011)onship between financial literacy and investor intentions(Raut, 2020;Mulyono, 2021).Further, Ali (2011) extended the TPB by exploring the mediation analysis of attitude and found that attitude partially mediated the association between risk perception and investors' intention.Furthermore, financial literacy has a substantial influence on investor decision making.Financial literacy is conceptualized as "the ability of the person to understand the financial or investment concepts and use them to manage financial resources effectively for a lifetime of financial well-being"(Hung et al., 2009;Lusardi et al., 2011).Higher fi-of financial literacy has been explored in the relationship between risk aversion and investment intention.Sadiq and Khan (2019) found that financial literacy did not moderate the relationship between risk aversion and long-term and short-term investment intentions.However, it has a direct positive influence on investors' investment intentions.Similarly, Dinç Aydemir and Aren (2017) also studied the moderating role of financial literacy and found that financial literacy did not moderate the relationship between the risk aversion and behavioral intentions of investors.Moreover, demographic factors such as age, income, education, and financial literacy are highly associated with risk aversion.The impact of risk aversion on investors' decision making differs based on gen- ). Attitude aids the individual in performing or not performing any action by considering its positive or negative consequences.Raut  (2018)opined that attitude is considered as one of the influential determinants of intention, i.e., an investor is guided by his own beliefs or attitude the mediating role of AT, SN and PBC between financial literacy and investors' intention and found that AT, nancial knowledge leads to more market participation and trading.Rooji et al. (2007) found that financial literacy has a significant positive influence on stock market participation.Basic knowledge of inflation, interest rate, stocks and bonds increase stock market participation.Prior studies argued that an individual's financial literacy significantly influences risk-taking behavior.Individuals with a low level of financial literacy underestimate their skills and avoid investing in volatile investment avenues due to a lack of confidence in other factors.Inversely, individuals overvalue their financial knowledge and invest in volatile and risky investments (Beal & Delpachitra, 2003; Grable, 2008; Aren & Hamamci, 2019; Kanagasabai & Aggarwal, 2020).Further, Aren and Zengin (2016) revealed that investors with low financial literacy levels positively impacted risk aversion and preferred low-risk investments like bank deposits.Individuals with the intermediate range choose to diversify their portfolio to balance risk.In comparison, high financial literacy negatively impacted risk aversion.Investors with high financial literacy prefer investing in high-risk investments such as equities.The above research findings are supported by the findings of Aren and Zengin (2016), Insler et al. (2016), Bayar et al. (2020), and Hermansson and Jonsson (2021).Moreover, Jiang et al. (2020) explored the significant relationship between financial literacy and investment performance among mutual funds.The study found that AFL significantly influences investment performance more than low literacy.High-financialliterate investors are less likely to experience losses and concerned about fee-related issues.Further, the moderating role der.Studies revealed that female investors are more risk-averse and choose less risk-associated investments than male investors (Keller & Siegrist, 2006; Barasinska et al., 2009; Montford & Goldsmith, 2015; Dickason & J. Ferreira, 2018; Lawrenson & Dickason-Koekemoer, 2020).In contrast, Pak and Mahmood (2015) and Aren and Zengin (2016) found that women are more risk-tolerant than men and prefer to invest in stocks and securities in the context of Kazakhstan.The studies presented thus far suggest the mediating role of constructs of TPB such as AT, SN and PBC in the context of entrepreneurial intention (Kautonen et al., 2009; Rosique-Blasco et al., 2017; Zhang & Cain, 2017; Munir et al., 2019) and students' behavior towards sports (Liao et al., 2022).Investment Management and Financial Innovations, Volume 20, Issue 4, 2023 http://dx.doi.org/10.21511/imfi.20(4).2023.18H 7 : Gender moderates the relationships among risk aversion, attitude, subjective norms, PBC and investors' intention.

Table 1 .
Details of respondents' profile (Hair et al., 2019)0.21511/imfi.20(4).2023.18toassess the indicator reliability of the constructs.The threshold value equal to or higher than 0.708 is considered as the existence of indicator reliability(Hair et al., 2019).The outer loading values for all the constructs were consistently more than the threshold value of 0.708.Therefore, indicator reliability is established.Cronbach's alpha and composite reliability tests were employed to measure the internal consistency reliability.A threshold value of 0.70 or more was considered as reliable.Table2exhibits that Cronbach's alpha and composite reliability test values were more than the threshold value of 0.70 for all the constructs.Hence, reliability was established.

Table 2 .
Results of the measurement model

Table 5 .
Results of the structural model

Table 6 .
Results of mediation analysis

Table 8 .
Results of MICOM (Financial literacy)

Table 10 .
Results of MGA (Financial literacy) Cain, 2017)did not mediate the relationship between risk aversion and intention.A positive and partial mediation of attitude, subjective norms and PBC between risk aversion and intention implies that risk aversion directly as well as indirectly influences behavioral intention through attitude, subjective norms and PBC.