In the year 2000, 24.6 per cent of Australian residents of working age were immigrants and, according to forecasts from the World Bank, immigration flows from developing to high-income countries will continue to increase. This means that immigrants’ financial behaviour can potentially have a huge impact on the Australian financial system. The traditions and culture of migrants can represent informal institutional controls that affect their financial decisions. These constraints, in turn, may impact on the financial development of Australia as a host nation.
This research investigates how home country institutions of immigrants affect their participation in the Australian financial market. Participation in any financial activity exposes individuals to some financial risks and higher return investments involve a greater risk and greater trust in institutions. For example, investing in equities requires more confidence in institutions than opening a savings account in a bank. Accordingly, stock market investment is a popular measure of financial risk. However, this measure might not account for the individual preferences measured by individual’s own assessment of his/her ability to take financial risk. The findings of this study indicate that the level of self-reported financial risk-taking is dependent on the fact whether the individual was born in Australia or abroad. This difference in risk attitudes can be explained by the institutional environment in the country of origin. However, institutions affect the financial behaviour of individuals through their investment and their risk-taking decisions in different ways. Thus, despite a close association between equity investment and financial risk-taking, assessed by individuals, these terms should not be used interchangeably.
|Keywords:||Immigrants to Australia, Economic Development, Financial Risk-taking, Stock Market Investment, Home Institutions|
PhD Student, School of Economics, Finance and Marketing, Royal Melbourne Institute of Technology, Melbourne, Victoria, Australia
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