The Influence of Financial Literacy, Risk Perception, Digital Technology Advancement, and Herding Behavior on Investment Decisions: The Mediating Role of Market Discipline

Dwi Susilowati1, & AM Soma2
1Telkom University, Bandung, Indonesia
2Telkom University, Bandung, Indonesia
DOI – http://doi.org/10.37502/IJSMR.2025.81038  

Abstract

The rapid advancement of digital technology has significantly increased access to investment platforms, particularly among students. However, this convenience does not necessarily translate into well-informed investment decisions. Many novice investors, including Master’s (Strata 2) students in Jakarta, often lack sufficient proficiency in financial concepts and the proficiency in assessing potential financial risks, rendering them vulnerable to high-risk and speculative investments. This study aims to examine the influence of financial literacy, risk perception, digital technology advancement, and herding behavior on investment decisions, with market discipline acting as a mediating variable.

Quantitative procedures were implemented using Structural Equation Modeling (SEM) with the Partial Least Squares (PLS) method. The research population comprised Master’s students in Jakarta who have access to digital investment platforms. A purposive sampling technique was used to select 210 respondents, with data collected through structured questionnaires.

The results indicate that financial literacy and digital technology advancement positively influence investment decisions, whereas risk perception and herding behavior have a negative impact. Furthermore, market discipline functions as a significant mediating variable, supporting more rational investment behavior.

Despite its contributions, the study is limited to Master’s students in Jakarta, which potentially limiting the relevance of the findings beyond the studied sample Future research is encouraged to include a more diverse demographic and to incorporate additional psychological and economic variables. This study provides insights into the academic literature by positioning market discipline as a mediating factor, offering new insights into the behavioral and cognitive dimensions of investment decision-making among young investors.

Keyword: Financial Literacy, Risk Perception, Digital Technology Advancement, Herding Behavior, Market Discipline, Investment Decisions, SEM-PLS

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