Search Results
Title: Non-Cognitive Abilities and Loan Delinquency: The Role of Self-Efficacy in Avoiding Financial Distress
Resulting in 1 citation.
| 1. |
Kuhnen, Camelia M. Melzer, Brian |
|
Non-Cognitive Abilities and Loan Delinquency: The Role of Self-Efficacy in Avoiding Financial Distress Presented: Berkeley, CA, Haas School of Business Research Seminar, University of California Berkeley, April 22, 2015 Cohort(s): Children of the NLSY79, NLSY79 Young Adult Publisher: University of California - Berkeley Keyword(s): Assets; Debt/Borrowing; Peabody Individual Achievement Test (PIAT- Math); Pearlin Mastery Scale; Risk Perception; Risk-Taking Permission to reprint the abstract has not been received from the publisher. Research on household financial decisions has largely focused on the importance of cognitive abilities in decision-making, emphasizing that IQ and mathematical ability predict stock market participation and the avoidance of financial mistakes. This paper takes a broader perspective by exploring the role of non-cognitive abilities in household finance decisions. Within the fields of labor and education economics, non-cognitive traits such as self-efficacy – which measures the extent to which people believe they can influence future outcomes through their actions – predict substantial differences in school achievement and employment outcomes. Using longitudinal household survey data, here we show that people's self-efficacy measured in childhood predicts differences in the likelihood of being in financial distress during adulthood. Individuals with better self-efficacy scores early in life are significantly less likely as adults to be delinquent on loans, to have assets repossessed, or to lose access to credit. These effects of self-efficacy are not explained by differences in time or risk preferences, demographic characteristics, cognitive ability, educational attainment or income. Note: This paper was also presented at the Frontiers in Finance conference, Banff, Alberta, June 2015. |
|
|
Bibliography Citation
Kuhnen, Camelia M. and Brian Melzer. "Non-Cognitive Abilities and Loan Delinquency: The Role of Self-Efficacy in Avoiding Financial Distress." Presented: Berkeley, CA, Haas School of Business Research Seminar, University of California Berkeley, April 22, 2015. |