The Impact of Financial Literacy on Retirement Planning with Serial Mediation of Financial Risk Tolerance and Saving Behavior: Evidence of Medium Entrepreneurs in Indonesia
Round 1
Reviewer 1 Report
1. Originality:
Southeast Asia is one of the most important economies in the world, and Indonesia is a representative country. The authors' strategy of choosing entrepreneurs from this country to explore financial behavior is very good and will provide further insight into the international financial situation.
2. Relationship to Literature:
It goes without saying that the author has given much of the literature to be organized in the middle paragraphs of the article, making the literature discussion a much richer basis for this article, and I am very pleased with the author's efforts in organizing and discussing the literature.
3. Methodology:
Structural equation modeling is a common statistical technique in behavioral science and is well suited to explore various correlations between psychology and attitudes. I believe that the authors' use of this technique is methodologically sound and the steps are well mastered.
4. Results:
The findings of this article are scientifically presented, and each table and graph is clear so that the reader knows where to focus, which is a good advantage. Also, I think that the authors' findings respond to the purpose of their proposed study.
5. Implications for research, practice and/or society:
Of course, the focus of this article is on the Indonesian entrepreneurs as a research sample to give a suggestion and reference to the whole business. I think the management meaning expressed by the author is very far-reaching, especially the insurance allocation and retirement plan, which is really something that should be paid attention to in the financial and business society that Indonesia is facing, and it is also meaningful to the financial entrepreneurs all over the world.
6. Quality of Communication:
I think this article has academic value and is very easy to understand. One thing I really appreciate about this paper is the display of the structural equation model, which would be a very worthwhile article for every reader of the journal "International Journal of Financial Studies". Therefore, I think it can be published in the journal "International Journal of Financial Studies".
Comments for author File: 
Comments.pdf
Author Response
Dear Reviewer
Thank you for your helping me to review my article and please find attached full revised by others reviewer.
Regard
Subur Harahap
Author Response File: Author Response.pdf
Reviewer 2 Report
This research examines the gist of financial literacy on the medium entrepreneurs in Indonesia, impacting the retirement planning through some mediator and moderating variables. The introduction section describes clearly the essence of this study and the method is well developed. In general, the manuscript is well organized. However, it needs to be further improved before moving forward.
1.The topic is too long, you should make the title shoter.
2.The abstract can be further refined. For example, the research results in the abstract can be summarized into three points.
3.The literature review part is too weak, the author has not given a relatively comprehensive review on the existing literature, and therefore it is hard to highlight the contribution of this research comparing with existing research.
4.Some fresh paper can be added, eg: Sun Y, Chen L., Sun, H., Farhad T. Low-carbon Financial Risk Factor Correlation in the Belt and Road PPP Project, Finance Research Letters, 2020, 101491. https://doi.org/10.1016/j.frl.2020.101491.
Author Response
Dear Reviewer
Please find below my response to your suggestion:
No.1
The topic is too long, you should make the title shorter:
I think the title is short enough to cover the subject of the article
No.2
The abstract can be further refined. For example, the research results in the abstract ca be summarized into three point.
The study reveals how financial literacy on retirement planning is serial mediated by financial risk tolerance and saving behavior, respectively, also moderated by herding behavior, while saving behavior as a mediator does not influence the relationship between financial literacy and retire-ment planning.
No.3
The literature review part is too weak, the author has not given a relatively comprehensive review on the existing literature, and therefore it is hard to highlight the contribution of this research comparing with existing research.
People were required to choose an investment selection and thus accomplish the FRT gauge because the investment's yield could not repose the investment made or cannot reach the predetermined level (Sun et al., 2020).
Metawa et al. (2019) construct a similar implication in the Egypt Stock Exchange regarding herd behaviour as a mediator which bridges the relationship between educational level and investor decision.
Alkhawaja and Albaity (2020) propose a matching contribution that financial risk tol-erance and knowledge of financial planning for retirement directly influence retire-ment saving behaviour. In contrast, there is a sequential mediation between financial literacy and retirement planning in this research.
No. 4
Some fresh paper can be added, eg: Sun Y, Chen L., Sun, H., Farhad T. Low-carbon Financial Risk Factor Correlation in the Belt and Road PPP Project, Finance Research Letters, 2020, 101491. https://doi.org/10.1016/j.frl.2020.101491.
Already input in and thank you
Reviewer 3 Report
#1 The causal relationship of the research aspects is not clear, and the description of the relevant aspects is too general. It is suggested that the author should present the causal relationship of the research aspects more accurately.
#2 The author uses Medium Entrepreneurs to analyze the importance of the research topic, but the author lacks strong support to explain the importance of Medium Entrepreneurs to the research topic. At the same time, whether the analysis results of different industries in sample selection are biased, the author should also consider the representativeness of the industry sample. legitimacy.
#3 The overall research structure of Fig 1, the author lacks objective research or practical support, so whether the research results can represent the industry's vagueness in "The Impact of Financial Literacy on Retirement Planning with serial mediation of financial risk tolerance and saving behavior" The research topic produces convergence.
#4 It is suggested that the author should consider the objectivity and representativeness of the research hypothesis, and at the same time, if the characteristics of the enterprise of a special scale are presented, it should also be supported by related issues in the past in the connection between theory and practice.
Author Response
Dear Reviewer
Please find below my response to your suggestion:
#1 The causal relationship of the research aspects is not clear, and the description of the relevant aspects is too general. It is suggested that the author should present the causal relationship of the research aspects more accurately.
Financial literacy is the level of an individual's ability to make decisions related to finance, therefore the higher the level of financial literacy of an individual, the greater the ability concerned in financial planning in the future in this case old-age financial planning. For example, a person who has a bachelor's degree in finance will know how to invest in retirement savings and how to calculate future financial needs, and then he is encouraged to do retirement planning by open retirement savings consist of a portfolio of assets such as equity, bond or cash.
Financial risk tolerance will lead himself concerned to his own risk profile, an understanding of own risk profile will open our mind regarding of future situation referring to the prospect theory, if the future estimated is risky, then he will tend to prepare savings today in the high risk investment products and vice versa. For example, Mr. A has a high-risk profile, so the choice of investment products is more on stock and derivative products, while if Mr. A has a low-risk profile, the choice of retirement savings products is more on bond investment products and bank deposits.
#2 The author uses Medium Entrepreneurs to analyze the importance of the research topic, but the author lacks strong support to explain the importance of Medium Entrepreneurs to the research topic. At the same time, whether the analysis results of different industries in sample selection are biased, the author should also consider the representativeness of the industry sample. legitimacy.
The reason for choosing medium entrepreneur respondents is that medium entrepreneurs have a huge contribution to Indonesia's gross domestic product (GDP), estimated at around 61.07% in 2021 and they are able to absorb a workforce of around 3.8 million people, so their contribution is significant impact on the Indonesian economy. Due to their huge contribution, it is necessary to think about how their condition at the time of retirement will remain prosperous through retirement planning. Besides that, medium-sized entrepreneurs have a relatively larger capital capacity compared to micro and small entrepreneurs; therefore, they have the flexibility to make cash reserves for retirement planning. Furthermore, the medium-sized entrepreneurs are engaged in trading household needs, agricultural products, restaurants and hotels and this group is the largest group of medium-sized entrepreneurs in Bekasi Regency.
#3 The overall research structure of Fig 1, the author lacks objective research or practical support, so whether the research results can represent the industry's vagueness in "The Impact of Financial Literacy on Retirement Planning with serial mediation of financial risk tolerance and saving behavior" The research topic produces convergence.
Furthermore, the effect of financial literacy on retirement planning is conducted to determine how an individual's literacy level can influence and encourage individuals to make retirement planning. In connection with the contradictory results of empirical research on the effect of financial literacy on retirement planning, further analysis was carried out by placing the variables of financial risk tolerance and saving behaviour as a mediation and herding behaviour as a moderator using prospect theory and the planned behaviour as the basis for the analysis. The empirical research take place to support the conceptual framework of this study are: a). research of Baskoro & Aulia (2019) on the effect of financial literacy on retirement planning, b). research of Heenkenda (2014), Gustafsson & Omark, (2015), Chatterjee, et al. al., (2017), Mahdzan, et al., (2017), and Zazili et al., (2017) for the effect of financial literacy on financial risk tolerance, saving behaviour and retirement planning, c). Further, research by Choi and Yoon (2020) for herding behaviour as a moderating variable between financial literacy and retirement planning.
#4 It is suggested that the author should consider the objectivity and representativeness of the research hypothesis, and at the same time, if the characteristics of the enterprise of a special scale are presented, it should also be supported by related issues in the past in the connection between theory and practice.
H-1
Based on the explanation above, this study's objective is to determine whether the fi-nancial literacy of medium-sized entrepreneurs influences retirement planning as the results of previous empirical research, Baskoro & Aulia, (2019)
H-2
Based on the explanation above, the objective of this study is to determine whether the financial risk tolerance of medium-sized entrepreneurs to be considered as a mediating variable that connects the effect of financial literacy on retirement planning as the results of previous studies, Heenkenda, (2014) and Garyn-Tal, (2016).
H-3
Based on the explanation above, the objective of this study is to find out whether the saving behavior of medium-sized entrepreneurs to be considered as a mediating variable that connects the effect of financial literacy on retirement planning as the results of previous studies, Beckmann, (2013) and Zazili, et al., ( 2017).
H-4
Based on the explanation above, the objective of this study is to find out whether financial risk tolerance and saving behavior of medium-sized entrepreneurs considered as serial mediating that connects the effect of financial literacy on retirement planning as the results of previous research, Heenkenda, (2014), Chatterjee, et al., (2017), and Zazili, et al., (2017).
H-5
Based on the explanation above, the objective of this study is to find out whether the herding behavior of medium-sized entrepreneurs considered as a moderator that strengthens the influence of financial literacy on retirement planning as the results of previous research, Choi & Yoon, (2020).
Author Response File: Author Response.pdf
Reviewer 4 Report
This is an interesting study of financial literacy and how it affects financial decision making. The results indicate a significant affect from financial literacy to financial decision making. I have the following comments:
- At the end of the introduction there should be an outline of the rest of the paper.
- There should be a more in-depth description of the data, particularly the financial literacy, financial risk tolerance and the other measures, including some basic summary statistics.
- In section 5.2. there should be more of a description of the methodology used to produce the results in table 4., for instance do these results indicate a causal or determining relationship between the variables?
Minor Points
- Although well-written, the paper could do with proof reading.
Author Response
Dear Reviewer
Please find below my response to your suggestion:
No.1- At the end of the introduction there should be an outline of the rest of the paper.
Summary to the above discussion individuals must realize that financial decisions and skills to prepare for a more prosperous life at retirement age are important. Therefore, retirement planning is also important for medium-sized entrepreneurs considering that their financial literacy, which is low compared to colleagues who work as employees, (Financial Services Authority, 2020) and medium-sized entrepreneurs are not mandatory by the state to participate in the retirement planning program. Furthermore, there is contradictory empirical research results related to the effect of financial literacy on retirement planning. Research done by Bucher-Koenen & Lusardi, (2011); Lusardi & Mitchell, (2011); Boisclair et al., (2017), Ricci & Caratelli, (2017); Kalmi & Ruuskanen, (2019); Larisa, et al., (2020) found significant, on the other hand research done by Aluodi et al., (2017); Farrar, et al., (2018), Niu, et al., (2018) found not significant. Prospect theory, (Kahmenan, Tversky, 1979), contributes ideas in analyzing the effect of financial literacy on retirement planning, because individuals will tend to dare to take high-risk retirement savings in facing uncertain old age finances. Likewise with The Planned Behavior (Azjen, 1991), the environment can provide encouragement to individuals in making choices and making decisions about retirement savings products.
No.2- There should be a more in-depth description of the data, particularly the financial literacy, financial risk tolerance and the other measures, including some basic summary statistics.
The reason for choosing medium entrepreneur respondents is that medium en-trepreneurs significantly contribute to Indonesia's gross domestic product (GDP), es-timated at around 61.07% in 2021. They can absorb a workforce of around 3.8 million people. Hence, their contribution is a significant impact on the Indonesian economy. Due to their vast contribution, it is necessary to consider how their condition in re-tirement will remain prosperous through retirement planning. Besides that, medi-um-sized entrepreneurs have a relatively larger capital capacity compared to micro and small entrepreneurs; therefore, they have the flexibility to make cash reserves for re-tirement planning. Furthermore, the medium-sized entrepreneurs are engaged in trading household needs, agricultural products, restaurants and hotels, and this group is the largest group of medium-sized entrepreneurs in Bekasi Regency.
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The financial literacy data measurement results show that respondents give an average score of 4.04. It indicates that respondents generally give a good score on fi-nancial literacy. The indicator of the compound interest concept is the highest value of 4.11, and the lowest value is the understanding of inflation of 4.02. Furthermore, the measurement of financial risk tolerance data shows that respondents give an average value of 4.06 and generally give a good score on financial risk tolerance. The indicator of daring to take a higher risk is the highest indicator at 4.10, and borrowing cash for investment is the lowest at 4.01.
The measurement of saving behaviour data results show that the respondents gave an average value of 4.05. It indicates that the respondents generally gave an ex-cellent value to saving behaviour. The indicator for saving for emergency funds is the highest indicator at 4.14, and the indicator for saving is the lowest at 4.01. Furthermore, the measurement of herding behaviour data showed that the respondents gave an av-erage value of 4.07. It indicates that the respondents generally gave an excellent value to herding behaviour. The indicator following the investment decisions of other entre-preneurs is the highest indicator, which is 4.15, and the indicator for many successful entrepreneurs in making retirement planning is the lowest, which is 4.01.
Summary of data statistics (mean and standard deviation) is a). Financial literacy: mean = 4,04 and standard deviation = 1,05; b). Financial risk tolerance: mean = 4,06 and standard deviation = 1,04; c). Saving behavior: mean = 4,05 and standard deviation = 0,99; d). Herding behavior: mean = 4,07 and standard deviation = 1,02; and Retirement planning: mean = 4,07 and standard deviation = 1,02.
No.3- In section 5.2. there should be more of a description of the methodology used to produce the results in table 4., for instance do these results indicate a causal or determining relationship between the variables?
The research data was obtained by distributing questionnaires to 388 selected respondents. The quantitative data were obtained and selected through reliability and validity tests. The selected data were then processed using the SEM-PLS application to measure the influence between variables.
Author Response File: Author Response.pdf
Round 2
Reviewer 2 Report
This research examines the gist of financial literacy on the medium entrepreneurs in Indonesia, impacting the retirement planning through some mediator and moderating variables. After careful modification, it is now relatively perfect and reasonable, but it can be optimized, such as:
The abstract can be further refined. For example, the research results in the abstract can be summarized into three points.
Author Response
Dear Reviewer
Thank you for your help in reviewing my article.
In order to follow up your suggestion, please find my revision (summarized the research result to be three point) as follow:
- How financial literacy on retirement planning is serial mediated by financial risk tolerance and saving behavior,
- Herding Behavior can strengthen financial literacy's influence on retirement planning, and
- Saving behavior as a mediator does not influence the relationship between financial literacy and retirement planning.
I look forward to hearing from you approval for my article.
Yours faithfully
Subur Harahap (Author)
Author Response File: Author Response.pdf
Reviewer 3 Report
Well done than the previous version.
The author should try to provide a practical explanation for why H3 on the medium entrepreneurs in Indonesia does not appear to be significant.
Author Response
Dear Reviewer
Thank you for your help in reviewing my article.
In order to follow up your suggestion, please find my revision as follow:
“For example, entrepreneurs with high knowledge are more likely to turn their business profits into working capital, such as purchasing products for their business activities. It is based on the value of the inflation rate in Indonesia, which is almost close to the interest rate on bank deposits, so entrepreneurs are more likely to pursue profits from their business higher than the inflation rate”.
I look forward to hearing from you approval for my article.
Yours faithfully
Subur Harahap (Author)
Author Response File: Author Response.pdf
