The behavioral biases of Muslims in Islamic banking and finance: a second-order self-reported religiosity measurement invariance

• Main Authors: Adewale, Abideen Adeyemi, Haron, Razali
• Format: Article
• Language: English; English; English
• Published: IIUM Press, International Islamic University Malaysia 2016
• Subjects: H Social Sciences (General); HG4001 Financial management. Business finance. Corporation finance.
• Online Access: http://irep.iium.edu.my/54446/1/05%20Adewale%20%26%20Haron%20R.pdf; http://irep.iium.edu.my/54446/7/54446_The%20behavioral%20biases%20of%20Muslims%20in%20Islamic%20banking%20and%20finance_WoS.pdf; http://irep.iium.edu.my/54446/13/54446_the%20behavioral%20biases%20of%20Muslim_scopus.pdf; http://irep.iium.edu.my/54446/

This study examines a measurement invariance of a second-order factor model of the behavioral biases in Islamic banking and finance activities among Muslims in Malaysia. Data elicited via a survey questionnaire was subjected to structural equation modeling analysis using the Amos 23.0 software. The study revealed that behavioral biases as a second-order factor is indicated by herding, cognitive dissonance, anchoring, regret aversion and overconfidence of first order factors. Measurement invariance was tested based on self-reported religiosity across a number of hierarchically structured invariance analysis models, including configural at the first-order level, metric, intercepts, and residuals at both the first-order and second-order levels. A significant variance was observed between the high and low self-reported religiosity groups. However, no difference was observed between the two groups and the ‘moderate’self-reported religiosity groups. Furthermore, based on the critical ratio score of statistical significance at alpha of 0.001, the latent mean difference tests of the second-order model indicates statistical significance across groups based on a path-by-path analysis.