Personality and borrowing behavior: An examination of
the role of need for material resources and need for
arousal traits on household’s borrowing decisions

Atefeh Yazdanparasta, Yasser Alhenawib,*
aAssistant Professor of Marketing, Mead Johnson Endowed Chair in Business, University of Evansville,

Schroeder Family School of Business Administration, Evansville, IN 47722, USA
bAssociate Professor of Finance, Director of the Institute of Banking and Finance, University of Evansville,

Schroeder Family School of Business Administration, Evansville, IN 47722, USA

Abstract

This research is an empirical examination of the role of psychological characteristics of household
decision makers in their borrowing decisions. Using a unique household survey data that ties together
relevant concepts from the Survey of Consumer Finances (SCF) and psychological and attitudinal
literature, we obtain direct measures of each surveyed household’s personality scores, relevant
attitudes, and financial profiles. Following regression analysis, we examine the relationship between
attitude towards borrowing and intentions to apply for specific borrowing options and inspect the role
of personality traits in such decisions. Specifically, we focus on tow personality traits, the need for
material resources and the need for arousal, which have been largely ignored in extant household
finance literature. Our findings indicate that the attitude toward borrowing and the intention to borrow
are not always consistent and, more interestingly, the discrepancies between the two vary across
personalities, highlighting the role of personality traits in borrowing decisions. Specifically, while the
positive relationship between attitude towards borrowing and intention to borrow is intuitive, we show
that this relationship is trivial for individuals who score low on need for material resources and
individuals with low degrees of need for arousal. In contrast, for individuals with higher levels of need
for material resources and need for arousal, the positive association between attitude towards
borrowing and the intention to borrow is significantly intensified. Further, our results suggest that
borrowing options are not homogenous and are motivated differently. Consistent with the view that
individuals with greater need for material resources consider quantity and quality of possessions as the
criteria to judge personal success, we find that these individuals have stronger intentions for mort-
gages, home improvement loans, business loans, personal loans, and payday loans. Similarly, con-

* Corresponding author. Tel.: �1-504-208-7749; fax: �1-812-488-2872.
E-mail address: ya22@evansville.edu (A. Yazdanparast)

Financial Services Review 26 (2017) 55–85

1057-0810/17/$ – see front matter © 2017 Academy of Financial Services. All rights reserved.



sistent with the view that individuals with greater need for arousal favor stimulation and excitement
that is often associated with more spending, we find that the borrowing decisions of these individual
are marked with stronger intentions for home improvement loans, business loans, student loans,
personal loans, and payday loans. The intentions for credits cards and automotive loans seem to be
independent from the borrower’s personality. Finally, we report strong evidence that personal attitu-
dinal biases towards money, risk, financial planning, and borrowing as well as certain demographic
characteristics influence household’s borrowing behavior. Our work contributes to the literature on
household finance in several ways. First, we focus on two under-researched personality traits to
examine their roles in household borrowing decisions. Second, this research recognizes the distinction
between the attitude towards borrowing and the intention to borrow and examines the inconsistencies
between them. Third, we consider a wide spectrum of borrowing options that differ in terms of risk,
motivation, and loan maturity. © 2017 Academy of Financial Services. All rights reserved.

JEL classification: D03; D14

Keywords: Personality; Household finance; Financial decision; Borrowing attitude; Borrowing intention

1. Introduction

Household finance is an emerging field of research (Brown & Taylor, 2011; Campbell,
2006) that has attracted scholars from finance, economics, management, communication, and
marketing (e.g., Besharat et al., 2014, 2015; Duclos, 2015; Lynch, 2011; and Shefrin &
Nicols, 2014). This growing and diverse interest is perhaps attributed to the far-reaching
impacts of household’s financial decisions on consumer welfare, marketing practices, finan-
cial service providers’ strategies, and the stability and reliability of the financial system
(Lynch, 2011; Priog & Roberts, 2007). Moreover, extant research has recognized the fact that
financial decisions are influenced not only by household’s financial profile but also by
decision makers’ personality, habits, and other individual characteristics (Lynch, 2011). Not
surprisingly, a growing area of household finance research examines psychological factors
impacting household financial decisions (see Guiso et al., 2002 for a comprehensive review).
Our work belongs to this area of literature and focuses on how individual characteristics
impact household’s borrowing choices.

Since borrowing behavior presents a specific context of consumer decision making, it is
important to study the factors that impact borrowing decisions. Theory of planned behavior,
a well-known theory in psychology (e.g., Ajzen & Fishbein 1980) maintains that behaviors
are influenced by attitudes and intentions. In fact, attitudes can influence behavior directly,
as well as indirectly through intentions (e.g., Bentler & Speckart, 1981, Hurst & Mendoza,
2016). Attitudes are generally defined as the lasting (favorable or unfavorable) evaluations
toward an object, action, and so forth, while an intention is a particular type of volition that
transforms the psychological state into guided bodily responses (Bagozzi, Baumgartner, &
Yi, 1989; Fishbein & Ajzen, 1975, 1980). Therefore, the more favorable the attitudes, the
higher the intentions for the behavior. However, extant research provides evidence for
inconsistency between attitude and intention (see Jonas, Diehl, & Bromer, 1997). After all,
we may have a positive attitude toward performing some act but fail to form an intention or

56 A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



intend to refrain from doing the action because of some non-attitudinal reason (Bagozzi et
al., 1989). The extant literature on household finance does not make a clear a distinction
between the attitude towards borrowing and the intention to borrow and possible inconsis-
tencies between them as related to decision making. We argue that individuals’ attitudes may
not be congruent with the actual intentions to take certain borrowing actions. Specifically, we
theorize that the relationship between the attitude toward borrowing and the intention to
borrow, and the mechanism thereof, is influenced by personality characteristics of the
decision maker.

The relationship between household finances and personality traits is in fact an under-
studied area despite the fact that personality traits can influence financial decision-making at
the individual and household level (Brown & Taylor, 2011). Previous research has mainly
used the well-known Big Five model of personality (McCrae & Costa, 1987) and examined
the influence of one, or a combination, of the five personality traits (i.e., openness to
experience, conscientiousness, extroversion, agreeableness, and neuroticism) on financial
decisions. We extend the extant research by examining the role of two additional personality
traits, the need for material resources and the need for arousal, that have been largely ignored
by extant literature on household finance. Recent research indicates that individuals with
greater need for material resources are relatively more concerned with their social image
(Christopher, Marek, & Carroll, 2004) and view possessions as means of achieving utilitarian
and social status (Richins & Dawson, 1992). Also, individuals who score higher on the need
for arousal trait have been shown to have a chronic need for impulse purchases (D’Astous,
Maltais, & Roberge, 1990; Rook, 1987). Therefore, we theorize that these two traits are
related to individuals’ financial preferences and, consequently, borrowing choices.1

Finally, extant literature often defines borrowing either too broadly or too narrowly. The
former approach overlooks the possibility that borrowing options are not homogenous (as in
Brandstatter, 1996; Davey & George, 2011; and Nyhus & Webley, 2001). The latter
approach focuses on a single borrowing option (e.g., credit card usage as in Norvilitis et al.,
2006 and Lee & Kwon, 2002) and, therefore, does not offer a side-by-side comparison of
different categories of borrowing in a unified framework. Unlike extant literature, we
consider a wide spectrum of borrowing options that differ in purpose and weigh differently
on the risk and maturity scales. This research uses a representative sample of primary
decision makers in U.S. households (the final sample includes 849 responses corresponding
to 85% response rate) and measures respondents’ attitudes toward financial issues as well as
their intentions to apply for eight different categories of loans including credit cards,
mortgage, home improvement, business loans, car loans, student loans, personal loans, and
payday loans. Respondents’ financial knowledge, risk tolerance, and personality character-
istics are also measured.2

Our findings suggest that the attitude towards borrowing and the intention to borrow do
not necessarily accord, highlighting the role of personality characteristics in such behaviors.
We also report strong evidence that different borrowing options are motivated differently.
Individuals with different personalities demonstrate borrowing patterns that reflect their
psychological needs. Individuals with greater need for material resources have stronger
intention to borrow in certain categories that lead to possessing materials. Similarly, indi-
viduals with greater need for arousal have a higher tendency to use borrowing options

57A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



associated with spending. Finally, the results show that attitudinal biases and predispositions
(e.g., attitude toward planning and borrowing) as well as past borrowing behaviors play a
significant role in household’s borrowing decisions.

Our work contributes to the extant research in several ways. First, our results suggest that
the attitude toward borrowing and the intention to borrow should not be used interchange-
ably. Second, our work indicates that the need for material resources and the need for arousal
significantly influence the way in which attitudinal biases translate into intentions to borrow.
Third, our findings suggest that the aggregation of borrowing behaviors may lead to distorted
conclusions, because borrowing options are not homogenous. Theoretically, our work pro-
vides general support to the behavioral approach to explaining financial decision making,
suggesting that psychological factors and individual biases can swerve financial decisions in
a systematic manner.

2. Literature review and hypotheses development

2.1. Personality traits

According to Lin (2010), personality traits are the dynamic organization of psycho
physiological systems that make up a person’s characteristic behavior, thoughts, and feel-
ings. One of the recent approaches in understanding the impact of personality traits on
behavior is the Meta-theoretic Model of Motivation and personality (i.e., the 3M model).3

This model accounts for how personality traits interact with the situation to influence
consumer attitudes and actions (Mowen, 2000). The model incorporates a hierarchical theory
of personality and stipulates that personality traits are at one of four levels (i.e., elemental,
compound, situational, and surface). Elemental traits are the focus of the present study
because of their fundamental nature in individual differences (Mowen & Carlson, 2003).
These traits are basic predispositions that arise from genetic endowment and early learning.
At the elemental level, the 3M model contains five traits from the big five personality model
(i.e., openness to experience, conscientiousness, extroversion, agreeableness, and neuroti-
cism5) as well as three additional traits namely, need for material resources, need for arousal,
and body resource needs (Mowen et al., 2007). These traits are used as screening tools,
because they can explain the variance in performance, are stable over time, and generalize
across groups and settings (Mowen & Carlson, 2003).

2.2. Personality traits and borrowing behavior

The extant literature on the relationship between borrowing behavior and personality traits
defines borrowing broadly as any behavior that constitutes using others’ wealth to satisfy
current consumption needs. For instance, Davey and George (2011) found that individuals
who score higher on openness have a tendency to try different or new products and services,
which implies stronger intentions to borrow money to satisfy this desire. Moreover, they
might be less hesitant to take on a loan as they see it as a new experience. Harley and
Wilhelm (1992) showed that highly conscientious individuals are self-disciplined and, thus,

58 A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



are more likely to regularly save compared to carefree people. As a result, these individuals
make planned decisions and are less likely in need of borrowing. The work of Sadi, Ghalibaf,
Rostami, Gholipour, and Gholipour (2011) showed that extroverts focus on external ele-
ments, decide easily, and live in present time. Further, extroversion is related to the need for
stimulation and social contact which affects spending behavior and consequently, increases
the dependency to borrow (Davey & George, 2011). Similarly, extraversion is negatively
related to the percentage of income that is saved and positively with likelihood of being in
debt and relying on credit cards (Davey & George, 2011). Nyhus and Webley (2001) argued
that highly agreeable people have fewer investments and need to borrow more. Finally, and
since shopping and spending are considered as means of temporary mood repair, lack of
emotional stability (i.e., high neuroticism) may lead individuals to engage in behaviors such
as impulse buying that could bring them short-term gratification (Youn & Faber, 2000). Lack
of self-control has been associated with a variety of personal and social problems, including
overspending (Mansfield, Pinto, & Parente, 2003), impulsive spending (Baumeister & Exline
2000; Strayhorn, 2002), and compulsive buying (Mowen, 2000). Consequently, individuals
scoring high on neuroticism are less likely to exhibit self-control and save less (Brandstatter,
1996; Davey & George, 2011). Moreover, Brown and Taylor’s (2011) used individual level
data drawn from the British Household Panel Survey and analyzed the influence of big five
personality traits on financial decisions regarding unsecured debt acquisition and financial
assets and found that personality traits have different effects across the various types of debt
and assets held.

Even though, these findings provide invaluable insights regarding the impact of person-
ality traits on financial behaviors of individuals, there is a gap in extant literature focusing
on the impact of personality traits on specific borrowing behaviors. As such, a more recent
stream of research, to which this study belongs, has emerged which recognizes that borrow-
ing actions are not similarly motivated and provides more specificity with regards to various
borrowing behaviors.

2.3. Hypothesis development

Overall, the review of extant literature identifies three major research gaps. First, the
extant research overlooks the fact that borrowing options differ vastly in terms of borrowing
horizon and purpose of borrowing and, thus, they may be motivated differently. The works
of Besharat et al. (2014, 2015) and Brown and Taylor’s (2011) present a significant attempt
to overcome this shortcoming but lack comprehensiveness, as they focus on a single aspect
of borrowing such as credit cards and unsecured debt acquisition. In contrast, the present
research analyzes a wide spectrum of borrowing options and considers long-term borrowing
(i.e., borrowing for big-ticket items that often require financing such as mortgage),
intermediate-term borrowing (e.g., automobile and student loans), and short-term repeated
borrowing decisions associated with smaller purchases (e.g., the use of payday loans, credit
cards, and store cards). The study also encompasses borrowing behaviors induced by asset
acquisition (e.g., home and car), consumptions (e.g., credit cards), educational needs (e.g.,
student loans), and investment (e.g., business loans). We also examine contrasting borrowing
options that imply varying levels of sophistication in financial behavior and knowledge (e.g.,

59A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



the process of granting business loans is more rigorous than the ad-hoc process of granting
payday loans). The work of Duclos (2015) indicates that the significance of a financial
decision is attributed not only to the size of the deal (e.g., mortgage) but also to the
accumulated effects of repeated decisions (e.g., credit card usage). Accordingly, we explore
a wide range of borrowing options that are inherently different in risk, commitment level,
term, and purpose.

Second, the extant literature does not consider the additional traits that have been recently
added to the 3M model (i.e., the need for material resources and the need for arousal).5 The
need for material resources is the general need for possessing material and accumulating
wealth. This trait stems from the importance one attaches to worldly possessions (Belk,
1984). For individuals with greater need for material resources, happiness is associated with
possessions. Therefore, they have a more positive attitude toward debt (Pinto, Parente, &
Palmer, 2000; Pirog & Roberts, 2007), and they are more willing to take on greater debts
(Ponchio & Aranha, 2008). This personal urge could make a materialistic individual more
willing to carry the burden of a loan to satisfy his/her psychological needs. Therefore,
controlling for income and wealth, we anticipate to find that those who score higher on this
trait exhibit a stronger intention to borrow compared to those who score lower.

Furthermore, the need for arousal is the general need or desire for stimulation and
excitement and countering fear (Licata, Mowen, Harris, & Brown, 2003; Mehrabian &
Russell, 1974). Individuals who score higher on this trait have a chronic need for stimulation
and instant gratification. Because purchase is frequently cited as a stimulating behavior
because of its power to satisfy urges for goods, services, experiences, and status (D’Astous
et al., 1990; Rook, 1987), we anticipate that the need for arousal trait is associated with
stronger intention to borrow (after controlling for income and wealth). As such, it is
hypothesized that:

Hypothesis 1a: Greater need for material resources is associated with a stronger intention
to borrow.

Hypothesis 1b: Greater need for arousal is associated with a stronger intention to borrow.

Third, the extant literature does not make a clear distinction between attitudes and
intentions. This may lead to dubious conclusions because a person’s attitude toward an action
may not be consistent with his intention to take an action (Ajzen & Fishbein, 1977). More
specifically, attitude toward a behavior is defined as the lasting evaluations of the action, but
the ultimate behavior is best captured by behavioral intentions which are in turn influenced
by many factors including the attitude toward the behavior (Fishbein & Ajzen, 1975, 1980).
Further, attitudes are individual factors mainly associated with the amount of affect or feeling
for or against something while intentions are influenced by situational, individual, and
elements of marketing stimuli communicated with consumers. Therefore, the distinction
between the two is theoretically and empirically important when investigating behaviors
(Fishbein & Ajzen, 1975; Sheppard, Hartwich, & Warshaw, 1988). In the context of this
research, we hypothesize that:

Hypothesis 2: The intention to borrow is not always consistent with the borrower’s
attitude towards borrowing.

60 A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



Furthermore, research has indicated that personality characteristics predict enduring ten-
dencies to engage in general classes of behavior (Mowen, 2000). Therefore, we anticipate
that the relationship between attitude towards borrowing and the intention to borrow is
moderated by personality traits. Accordingly, we test the following hypotheses:

Hypothesis 3a: The relationship between attitude towards borrowing and the intention to
borrow is stronger for individuals with greater need for material
resources.

Hypothesis 3b: The relationship between attitude towards borrowing and the intention to
borrow is stronger for individuals with greater need for arousal.

The following graph illustrates the connections between the hypotheses:

3. Data collection and methods

3.1. Procedure

Data were collected through an online survey administrated by Qualtrics on Amazon’s
Mechanical Turk (MTurk; Buhrmester et al., 2011; Rand, 2012). MTurk provides behavioral
researchers with representative consumer samples because MTurk samples tap more diverse
populations and yield greater generalizability (Buhrmester et al., 2011; Goodman et al.,
2013; Mason & Suri 2012).

Participation was restricted to U.S. citizens or permanent residents who were at least 18
years old and declared to be one of the primary financial decision makers in their household
to ensure reliability of responses (see Campbell, 2006 and Alhenawi & Elkhal, 2013). Upon
qualification, participants responded to four questions that measured enduring involvement
in personal finance matters (Bloch, Sherrell, & Ridgway, 1986) followed by questions about
attitude toward money Christopher et al. (2004) and financial knowledge (Knoll & Houts,
2012). Next, risk tolerance was measured using items from the well-known investment risk
tolerance quiz (Grable & Lytton, 1999). This quiz is shown to be a reliable and valid measure
of risk tolerance (e.g., Gilliam, Chatterjee, & Grable, 2010; Larkin, Lucey, & Mulholland,
2013) to demonstrate the maximum amount of uncertainty that individuals are willing to
accept when making financial decisions (Grable, 2000).

Personality traits were measured using measures from Licata, Mowen, Harris, and Brown
(2003) that were first developed by Mowen (2000). Respondents were presented with short

61A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



phrases and asked “how often do you feel/act this way” (responses were taken on 5-point
scales anchored by 1 � never to 5 � always). Attitude towards planning was also measured
to control for respondents’ perceptions of financial planning (Yamauchi & Templer, 1982).

Borrowing behavior was captured using questions from the Survey of Consumer Finances
(SCF) administered by the Federal Reserve—a reliable resource that is largely overlooked in
academic research (Campbell, 2006). This instrument does not only gauge overall borrowing
intentions, but also allows for differential analyses of several types of borrowing options. The
SCF identifies eight categories of borrowing avenues: credit cards, mortgage, home improve-
ment, business loans, car loans, student loans, personal loans, and payday loans.

Attitude toward borrowing was measured using seven items adapted from the Financial
Consumer Agency of Canada. These items measure individuals’ overall views about bor-
rowing using the 5-point Likert scale (1 � strongly disagree; 5 � strongly agree). The last
sections of the questionnaire contained questions related to financial profile. Previous
research has shown that financial profile measures are important in the study of household
financial behavior. For instance, Johnson and Li (2010) found that a household with a high
debt service ratio is significantly more likely to be turned down for credit than other
households. Similarly, the work of Alhenawi and Elkhal (2013) indicated that self-
assessment of one’s financial aptitude greatly influences financial behavior. Accordingly,
financial profile questions included questions on major events with dramatic changes on
household financial behavior over that past two years,6 home ownership status, credit score
category, having or not having a professional financial planner, confidence in making the best
choices in managing money, and respondents’ description of their financial situation (i.e.,
living comfortably, meeting basic expenses with a little left over for extras, etc.). Demo-
graphic questions included standard controls such as gender, age, income level, marital
status, zip code of the residence, household size, ethnicity, education, and so forth.

3.2. Sample

Overall, we collected 1,000 responses, out of which 849 were used in the analyses after
eliminating respondents who did not have the required qualifications, had incomplete
responses, or did not pass the instructional manipulation check question included to gauge
whether participants paid sufficient attention to the instructions (Goodman et al., 2013).
Table 1 provides characteristics of the sample.

Panel A of Table 1 shows respondents’ scores on personality dimensions. Panel B shows
responses to attitudinal tests, self-assessments, and other personal factors quizzes. Respon-
dents were highly involved in personal finance matters, had relatively favorable attitudes
toward money and financial planning (79%), and had an average attitude toward borrowing.
The average percentage score on the risk tolerance was 49.40% which is comparable to other
U.S.-based studies (e.g., Ryack, 2011).8 The mean percentage score on the financial knowl-
edge quiz was 59.57% indicating an overall deficiency in financial knowledge at the
household level which is consistent with the major belief in the literature (see, e.g.,
Campbell, 2006). Similarly, the sample mean on the financial planning quiz was 60.13%,
indicating poor financial planning. This is in line with previous research findings (see, e.g.,
Lusardi & Mitchell, 2008).

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Table 1 Sample characteristics

Cronbach’s � Min Max Mean Dev. Obs. %

Panel A: Personality traits
Introversion .89 1.00 5.00 3.00 0.94 849
Materialism .90 1.00 5.00 2.53 0.93 849
Openness .87 1.00 5.00 3.41 0.80 849
Neuroticism .92 1.00 5.00 2.47 0.96 849
Agreeableness .90 1.00 5.00 3.72 0.71 849
Conscientiousness .87 1.25 5.00 3.61 0.78 849
Need for arousal .88 1.00 5.00 2.52 0.86 849

Panel B: Attitudes, self-evaluations, and quiz scores
Involvement in personal finance .79 1.00 5.00 4.09 0.76 849
Attitude towards money .60 3.00 7.00 4.91 0.63 849
Attitude towards financial planning .87 0.20 1.00 0.79 0.13 849
Attitude towards borrowing .73 0.20 0.89 0.45 0.14 849
Risk tolerance quiz % 26.53% 81.63% 49.40% 9.99% 849
Financial knowledge quiz % 0.00% 100.00% 59.57% 21.69% 849
Financial planning quiz % 20.00% 100.00% 60.13% 17.74% 849
Self-assessment of financial situation

Don’t know 6 0.71%
Comfortable 142 16.73%
Make little more than needed 366 43.11%
Make just enough 249 29.33%
Make less than needed 86 10.13%

Confidence in making financial decisions
Don’t know 14 1.65%
Very 111 13.07%
Somewhat 379 44.64%
Not too much 226 26.62%
Not confident at all 119 14.02%

Panel C: Borrowing behavior
Have credit card and pay on time 361 42.52%
Have credit card and carry balance 299 35.22%
Have mortgage account 250 29.45%
Refinanced home 97 11.43%
Obtained home-equity loan 41 4.83%
Obtained home-improvement loan 33 3.89%
Have business loan 14 1.65%
Have car loan 261 30.74%
Have student loan 342 40.28%
Have personal loan 139 16.37%
Have pay-day loan 21 2.47%
Applied for credit in past five years 454 53.47%
Filed for bankruptcy 67 7.89%
Make payments on time 631 74.32%
Likely to default in the future 56 6.60%
Likely to file bankruptcy in the future 35 4.12%

Panel D: Borrowing intentions
Credit card 1.00 5.00 2.18 1.30 849
Mortgage 1.00 5.00 2.05 1.29 849
Home improvement loan 1.00 5.00 1.60 0.94 849
Business loan 1.00 5.00 1.58 0.95 849
Car loan 1.00 5.00 2.45 1.32 849
Student loan 1.00 5.00 1.81 1.25 849
Personal Loan 1.00 5.00 1.59 0.96 849
Payday Loan 1.00 5.00 1.30 0.75 849

Panel E: Household financial profile
Dramatic event last 2 years? Yes/no 326 38.40%
Own house 412 48.53%
Income

Income Category 1 10 1.18%
Income Category 2 56 6.60%
Income Category 3 197 23.20%
Income Category 4 228 26.86%
Income Category 5 135 15.90%
Income Category 6 108 12.72%

(continued on next page)

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The last two parts of Panel B list respondents’ self-evaluations of their financial situation
and ability to make financial decisions (adapted from a survey used by the Consumer
Federation of America (2013). An interestingly find was that 57.73% (13.07% � 44.64%) of
participants had average to high confidence in their ability to make financial decisions while

Table 1 (Continued)

Cronbach’s � Min Max Mean Dev. Obs. %

Income Category 7 60 7.07%
Income Category 8 38 4.48%
Income Category 9 6 0.71%
Income Category 10 11 1.30%

Credit score
Don’t know 139 16.37%
Poor 130 15.31%
Fair 261 30.74%
Good 319 37.57%

Panel F: Demographics
Age 18.00 82.00 34.04 11.51 849 100.00%
Gender 0.00 1.00 0.45 0.50 849 100.00%
Family size 1.00 6.00 2.55 1.27 849 100.00%
Financial education 157 18.49%
Working in the financial sector 85 10.01%
Marital status

Married 280 32.98%
Single 350 41.22%
Divorced 56 6.60%
Widowed 6 0.71%
Live with partner 157 18.49%

Ethnicity
White 652 76.80%
African American 65 7.66%
Hispanic 49 5.77%
American Indian 5 0.59%
Asian 58 6.83%
Other 9 1.06%
Prefer not to answer 11 1.30%

Education
Less than high school 4 0.47%
High school 105 12.37%
Some college 239 28.15%
Associate degree 81 9.54%
Bachelor degree 314 36.98%
Masters 86 10.13%
Doctorate 20 2.36%

Notes: Data were collected through an online survey administrated by Qualtrics on Amazon’s Mechanical Turk
(MTurk). Participation is restricted to U. S. citizens or permanent residents who are at least 18 and who reported
that they were one of the primary financial decision makers in their households. Qualified participants responded
to quizzes on enduring financial involvement (Bloch, Sherrell, & Ridgway, 1986); attitude toward money
(Christopher, Marek, & Carroll, 2004); financial knowledge (Knoll & Houts, 2012); attitude towards financial
planning (Yamauchi & Templer, 1982); attitude towards borrowing (Financial Consumer Agency of Canada) and
risk tolerance (Grable & Lytton, 1999). Each participant was assigned a percentage score based on each of the
quizzes. This score represents the ratio of his/her total score in the quiz to the highest possible score. Personality
traits were measured using short quizzes adapted from Licata, Mowen, Harris, and Brown (2003). Borrowing
behavior questions were adapted from the Survey of Consumer Finances (SCF) administered by the Federal
Reserve. The SCF identifies eight categories of borrowing avenues: credit cards, mortgage, home improvement,
business loans, car loans, student loans, personal loans, and payday loans. This classification is appropriate
because it captures a great deal of the variations within the numerous borrowing options available to households
(see Instrument section for more explanation). The questionnaire also includes sections that explored the financial
profile and demographic characteristics of the participants. The final sample includes 849 cases.

64 A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



the scores in financial knowledge and planning quizzes were below average. This indicates
that raising financial literacy may require not only education, but also changing financial
perceptions and attitudes (see Alhenawi & Elkhal, 2013 for similar argument).

Panel C captures actual borrowing behaviors. As indicated in the table, 42.52% of
respondents owned a credit card and paid on time (i.e., they did not have credit card debt).
In contrast, 35.22% were indebted to credit card companies (i.e., they carried a monthly
balance). The percentages in the table indicate that the most common types of borrowing
(excluding credit cards) were student loans (40.28%), car loans (30.74%), mortgage loans
(29.45%), and personal loans (16.37%). Other types of loans such as home equity loans,
home improvement loans, payday loans, and business loans were much less popular (less
than 5%).

To control for borrowing ability, we also included additional five questions on credit
applications and bankruptcy (adopted from the SCF). We found that 53.47% of respondents
had applied for credit in the past five years, 74.32% paid their loan payments on time, and
only 6.6% anticipated defaulting in the future. Also, 7.89% of respondents had filed for
bankruptcy in the past, and 4.12% anticipated filing for bankruptcy in the future.

Panel D demonstrates participants’ intentions to use different types of borrowing options
(on a scale of 1 to 5, where 1 � very unlikely and 5� very likely). The demand for car loans
was the highest (2.45), followed by credit cards (2.18), and homes (2.05). Personal loans
(1.59), business loans (1.58), and payday loans (1.30) had lower scores.

Panels E and F demonstrate the financial and non-financial characteristics of the sample.
About 38.40% of respondents reported that they endured a significant event in the past two
years that had changed their financial behavior and attitudes. The sample was reasonably
balanced across various income categories, credit scores classes, marital status, ethnicity, and
education levels. Average respondents’ age was 34.04 years with a minimum of 18 and a
maximum of 82 years. About 45% of respondents were males. Average family size was 2.55
with a minimum of one (single) and a maximum of six. About 18.49% of respondents had
formal financial education, and about 10% indicated that they worked in the financial sector.
Overall, the sample was balanced and consistent with previous studies (e.g., zharvAlhenawi
& Elkhal, 2013; Hilgert, Hogarth, & Beverly, 2003; and Johnson & Li, 2010).

3.3. Regression analysis

We used multivariate regression models where the regressors are explanatory variables—
including personality traits—theorized to influence the regressand. Table 2 provides the
results of the regression analyses. The regressand in regression one is the attitude toward
borrowing while the regressands in regressions two to nine are the intentions to use eight
different types of borrowing. In each borrowing intention regression, we included binary
variables that indicate historical borrowing behavior in the same category (e.g., in the
mortgage regression model, we include three variables that indicate relevant historical
borrowing behaviors such as having an existing mortgage loan, refinanced mortgage, or
home equity loan). The models also include standard controls such as financial profile and
demographics. We first estimated full models with all possible regressors, then we ran
concise models with significant coefficients only for better parsimony. We found negligible

65A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



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(c

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)

66 A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



T
ab

le
2

(C
on

tin
ue

d)

(1
)

A
tti

tu
de

(2
)

C
re

di
t

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rd

(3
)

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)
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t

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(5
)

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us

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s
lo

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(6

)
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om

ob
ile

(7
)

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ud

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rs

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ua

l
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).

67A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



differences between the full models and the concise models and, consequently, we only
present the results with the concise models. The results for the full models are available upon
request from the authors.

The findings in Table 2 generally support our first set of hypotheses. Those individuals
with higher levels of need for material resources had stronger intentions to borrow in all
categories except for personal loans and payday loans. This is consistent with Hypothesis 1a.
Similarly, higher levels of need for arousal was associated with a stronger intention to borrow
in all categories that lends support to Hypothesis 1b.

As expected, the coefficients on the attitude towards borrowing (AttBorrow) were positive
and significant across all borrowing types (except for student loans). This indicates that a
positive attitude towards borrowing is positively associated with intentions to borrow.
However, when the coefficients of attitudes and intentions across personalities are consid-
ered, the results provided evidence supporting Hypothesis 2 (i.e., intention to borrow and the
attitude towards borrowing may not always accord). Specifically, the results indicate that
despite high levels of intention to use certain types of borrowing (student loans and personal
loans), neurotic individuals have a neutral attitude toward borrowing (i.e., their attitudes
towards borrowing is not favorable in general). Moreover, individuals who score high on
introversion exhibit stronger intentions to open new credit card accounts although despite
having neutral attitudes towards borrowing. Also, those with higher levels of agreeableness
and conscientiousness show negative attitudes towards borrowing, but this neither strength-
ens nor weakens their intentions to borrow in almost all categories (except for mortgage and
payday loans).

The coefficients of BorrHist are positive, significant, and statistically distinctive from zero
within each borrowing category (except mortgage). Therefore, previous borrowing behavior
is positively related to future borrowing behavior. This implies that borrowing could be a
repetitive or an addictive behavior that makes future borrowing more probable. In other
words, it could be argued that borrowers somehow create a level of comfort zone in
borrowing, since those who have borrowed in a certain manner in the past have relatively
stronger intentions to borrow in a similar manner in the future. The finding that attitude
towards borrowing is relatively more favorable for those who have applied for credit in the
past 5 years (see BorrStatApld

)) also supports this view. The intention to borrow is relatively
weaker for those who pay their bills on time (BorrStatOntime

). This could be related to the fact
that for responsible borrowers who make timely payments, more loans would result in
inability to make timely payments in the future.

In addition, Table 2 unveils several attributes of the relationship between financial
behavior and personalities. More specifically, the results in Table 2 do not provide support
for the findings of Davey and George (2011) who provided evidence indicating that openness
to experience is associated with higher intentions to borrow. Our results do not support the
findings of Harley and Wilhelm (1992) reporting that highly conscientious individuals are
less likely in need of borrowing. Our findings indicate that openness to experience and
conscientiousness are personality traits that do not weaken, nor do they intensify borrowing
intentions.

Moreover, our results indicate that neuroticism is positively associated with certain types
of borrowings such as student loans and personal loans. This is consistent with the view that

68 A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



neuroticism is associated with overspending (Mansfield, Pinto, & Parente, 2003), impulsive
spending (Baumeister and Exline 2000; Strayhorn, 2002; Youn & Faber, 2000), compulsive
buying (Mowen, 2000), and poor financial planning (Brandstatter, 1996; Davey and George,
2011). It is clear that these types of this financial behavior would eventually lead to
immediate need for money that is often satisfied with borrowing in the form of personal
loans. Poor financial planning (another behavior related to this personality trait) could result
in higher needs for student loans as well (please note that we have controlled for the effect
of income).

Our results also indicate that introversion is not associated with any change in the
intention to borrow across seven different borrowing options except for credit cards. The
positive association between this trait and intentions to credit card borrowing is indeed
interesting and in line with an earlier finding by Davey and George (2011), supplying
additional support for our argument that borrowing options are not homogenous. However,
our findings do not support those of Sadi et al. (2011) who found that extroversion (i.e., the
opposite of introversion) increases the tendency to borrow.

Finally, we found that agreeableness is positively related to the intention to use mortgages
and negatively to the intention to use payday loans. Nyhus and Webley (2001) showed that
highly agreeable people have higher needs to borrow more. Our results indicates that this
conclusions extends only to mortgages.

Contemplating the differences between our findings and the findings of earlier research, we
argue that these differences are attributed to several factors. First, we take a more meticulous
approach to borrowing by considering a wide range of borrowing options and adding more
specificity to understanding borrowing decisions. Second, we use a comprehensive personality
profiling approach by examining the two understudied personality traits in addition to the
traditionally studied Big Five traits while specifically focusing on effects of the need for material
resources and the need for arousal traits. Overall, our results support the main argument that
borrowing options are not homogenous and they vary across personalities.

3.4. Interaction plots

Interaction plots are widely used in the literature to display interaction effects. An
interaction effect is witnessed when the joint effects of two variables is the focus of attention
so that the outcome variable would show significant differences for different levels of the
independent variable at different levels of the moderator variable (Hair et al., 2006). In the
context of this article, we are interested in finding how a certain personality trait affects
the relationship between the attitude towards borrowing and the intention to borrow. While
the connection between the attitude towards borrowing and the intention to borrow is
intuitive, hypotheses Hypothesis 3a and Hypothesis 3b postulate that the strength of this
connection is a function of the borrower’s personality. Specifically, the two hypotheses
suggest that the impact of attitude toward borrowing on intention to borrow is intensified for
individuals with greater need for material resources (H3a) and/or greater need for arousal
(H3b). To test these hypotheses, we use the mode probe analysis approach using PROCESS
model 1 (Hayes, 2012) where personality trait is the moderator, the attitude toward borrow-
ing is the independent variable and the borrowing intention is the dependent variable. Figure 1

69A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



Figure 1 Interaction plots–The need for material resources

70 A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



is devoted for the need for material resources trait and Figure 2 is devoted for the need for
arousal trait.

The top two charts in Figure 1 indicate that the need for material resources trait signifi-
cantly moderates the relationship between attitude towards borrowing and the intention on to
borrow. In other words, the relationship between attitude towards borrowing and the inten-
tion to apply for mortgages and home improvement loans shows significantly different
patterns at different levels of this personality trait. The results in Panel A indicate that at
lower levels of the need for material resources (i.e., for those individuals who do not score
high on this trait as indicated by one standard deviation below the mean in our analyses), high
or low levels of attitudes toward borrowing (i.e., more or less favorable attitudes toward
borrowing) do not significantly impact intentions to apply for a mortgage. The average score
on the intention to open a new mortgage account for those who have a more favorable
attitude towards borrowing is 1.87. The corresponding average score for those who have a
less favorable attitude towards borrowing is 1.80. The difference, 0.07, is trivial and is not

Figure 1 (Continued)

Notes: The figure shows the results of running interaction plots to discern how the need for material resources
trait moderates the relationship between the attitude towards borrowing and the intentions to borrow. To run the
test, we classify participants into two classes using the mean of scores and the standard deviation of the scores
on the need for material resources test. Specifically, respondents with a need for material resources scores higher
(lower) than one standard deviation above (below) the mean are classified as individuals with greater (lesser) need
for material resources. Analogically, respondents with an attitude towards borrowing scores higher (lower) than
one standard deviation above (below) the mean are classified as individuals with more (less) favorable attitude
towards borrowing. We run the model with all eight borrowing options but we report only the findings with
significant interaction effects. Under each chart, we report the averages scores on the corresponding intention to
borrow. We also report the difference and statistical significance (p-value) for the difference in average scores
between the more favorable attitude and the less favorable attitude subgroups. Asterisks denote statistical
significance at the 1% (***), 5% (**), or 10% (*) level.

71A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



Figure 2 Interaction plots–The need for arousal

72 A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



statistically different from zero (p � 0.814). In contrast, when the need for material resources
is higher (i.e., in case of individuals who score high on this trait as indicated by one standard
deviation above the mean in our analyses), intention to apply for a mortgage is significantly
different at different levels of attitude towards borrowing. More specifically, for those with
greater need for material resources, when attitude toward borrowing is more favorable,
intention to apply for mortgage loans in significantly higher compared to those with less
favorable attitudes towards borrowing. The average score on the intention to open a new
mortgage account for those who have a more favorable attitude towards borrowing is 2.83
that is 0.92 point higher than the corresponding score for those who have a less favorable
attitude (1.91). It is noteworthy that the difference in intentions is almost one scale unit (on
a scale of 1 to 5) indicating 18.4% increase in intentions to apply for mortgage that is
statistically significant at the 5% level (p � 0.018).

The same observations extend to Panel B. When the need for material resources is low,
the average score on the intention to obtain a home improvement loan for those who have
a more favorable attitude towards borrowing is not significantly different from those who

Figure 2 (Continued)

Notes: The figure shows the results of running interaction plots to discern how the need for arousal trait
moderates the relationship between the attitude towards borrowing and the intentions to borrow. To run the test,
we classify participants into two classes using the mean of scores and the standard deviation of the scores on the
need for arousal test. Specifically, respondents with a need for arousal scores higher (lower) than one standard
deviation above (below) the mean are classified as individuals with greater (lesser) need for arousal. Analogically,
respondents with an attitude towards borrowing scores higher (lower) than one standard deviation above (below)
the mean are classified as individuals with more (less) favorable attitude towards borrowing. We run the model
with all eight borrowing options but we report only the findings with significant interaction effects. Under each chart,
we report the averages scores on the corresponding intention to borrow. We also report the difference and statistical
significance (p-value) for the difference in average scores between the more favorable attitude and the less favorable
attitude subgroups. Asterisks denote statistical significance at the 1% (***), 5% (**), or 10% (*) level.

73A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



have a less favorable attitude (p � 0.281). In contrast, when the need for material resources
is greater, a more favorable attitude towards borrowing is associated with a significantly
higher intention to draw a home improvement loan (mean difference is 1.05 points and is
statistically significant at the 1% level; p � 0.001).

Panel C reveals similar findings with the intention to draw a business loan. When the need
for material resources is low, the average score for those who have a more favorable attitude
towards borrowing is 1.56 while it is 1.31 for those with a less favorable attitude towards
borrowing. The difference is 0.25 scale points which is statistically insignificant (p � 0.239).
When the need for material resources is higher, the average score for those who have a more
favorable attitude towards borrowing is 2.45 while the corresponding score for those who
have a less favorable attitude towards borrowing is 1.30. The difference is an impressive 1.15
points and is statistically significant (p-value is less than 0.001).

The findings also extend to Panel D with one exception. When the need for material
resources is low, the attitude towards borrowing there is no significant difference in indi-
viduals’ intention to take a payday loan regardless of their attitudes towards borrowing.
However, for those who score higher on the need for material resources, the role of the
attitude is much stronger in relation to intention to take payday loans. More specifically,
when the need for material resources is low, the average score on the intention to take a
payday loan for those who have a more favorable attitude towards borrowing is 1.41. The
corresponding score for those who have a less favorable attitude towards borrowing is
1.08. The difference of 0.33 is only marginally significant at the 10% (p � 0.058). In
contrast, when the need for material resources is greater, the average score on the
intention to take a payday loan for those who have a more favorable attitude towards
borrowing is 2.11 that is 1.21 point higher than the average score for those who have a
less favorable attitude (0.90). The difference is 1.05 points and is statistically significant
at the 1% level (p � 0.001).

Finally, the plots in Panel E show that the need for material resources affects how the
attitude towards borrowing translate into intentions to obtain a personal loan. The plots
show that a more favorable attitude towards borrowing leads to a stronger intention for
personal loans, but the relationship is much stronger when the need for material
resources is greater.

Overall, the findings in Figure 1 support Hypothesis 3a. Specifically, they present evi-
dence consistent with the supposition that while the connection between the attitude towards
borrowing and the intention to borrow is intuitive, it is meaningfully impacted by one’s need
for material resources. In Panels A, B, and C, when the need for material resources is low,
the attitude towards borrowing seems to have insignificant role in determining one’s inten-
tion to borrow. In Panels D and E, when the need for material resources is low the attitude
towards borrowing has a weaker impact on the intention to borrow. In contrast, when the
need for material resources is higher, a more favorable attitude towards borrowing signifi-
cantly intensifies one’s intention to borrow.

The results in Figure 2 provide support of the hypothesis regarding the moderating role of
the need for arousal in the relationship between attitude towards borrowing and specific
borrowing intentions. The plots in Panel A indicate that at lower levels of the need for arousal
(i.e., those individuals who score low on this trait), the intention to obtain a home improve-

74 A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



ment loan does not significantly change at different levels of attitudes towards borrowing.
More specifically, when need for arousal is low, home improvement loan intention for those
who have a more favorable attitude towards borrowing is 1.62, and the corresponding score
for those who have a less favorable attitude towards borrowing is 1.36. The difference, 0.26,
is small and insignificant (p � 0.220). In contrast, when the need for arousal is higher, the
average score on the intention for home improvement loan for those who have a more
favorable attitude towards borrowing is 2.49 which is 1.21 points higher than the average
score for those who have a less favorable attitude (M � 1.28). The difference is statistically
significant at the 1% level (p � 0.001). We conclude that when the need for arousal is high,
the attitude towards borrowing plays a significant role in enticing one to apply for home
improvement loan. When the need for arousal is low, the attitude towards borrowing does not
impact the intention to take a home improvement loan.

The same observations extend to Panels B and C; that is, when the need for arousal is low,
the average score on the intention to draw a business loan (Panel B) or to take a payday loan
(Panel C) does not improve significantly when the attitude towards borrowing is more
favorable. In contrast, when the need for arousal is greater, the average score on the intention
to draw a business loan (Panel B) or to take a payday loan (Panel C) is systematically higher
for those who demonstrate a more favorable attitude towards borrowing.

The observations also extend to Panel D but with a remarkably lower significance. We still
observe a non-significant impact of attitude on the intention to take a student loan for those
who have a lesser need for arousal (the difference is a small �0.18 points and is statistically
insignificant form zero). When the need for arousal is greater, there is a more positive impact
of attitude on the intention to take a student loan. The difference is a reasonable 0.54 point
and is statistically significant at 10% only (p-value is 0.066).

Finally, the plots in Panel E show that the need for arousal impacts how the attitude
towards borrowing translate into intentions to obtain a personal loan. The plots show that a
more favorable attitude towards borrowing leads to a stronger intention for personal loans but
the relationship is much stronger when the need for arousal is greater.

Overall, the findings in Figure 2 support Hypothesis 3b. They indicate that the relationship
between attitude towards borrowing and the intention to borrow extends only to indi-
viduals with greater need for arousal. In all five panels, except Panel E, when the need
for arousal is low, the attitude towards borrowing exhibits an insignificant role in one’s
intention to borrow. In Panel E, when the need for arousal is low, the attitude towards
borrowing exhibits a much weaker impact on one’s intention to borrow. In contrast,
when the need for arousal is greater, the attitude towards borrowing significantly
strengthens one’s intention to borrow.

3.5. Regressions with interaction terms

In this section, we focus on the interaction effects between the attitude towards borrowing,
the intention to borrow, and personality traits. Hypotheses 3a and 3b postulate that the
attitude towards borrowing might have a different effect on the intention to borrow for
individuals with different personalities. We test these hypotheses by estimating the incre-

75A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



mental effect of personality on the relationship between the attitude towards borrowing and
the intention to borrow.

Empirically, we estimate the following regression models

BorrIntn � C � �1Matr � �2AttBorrow � �3�Matr � AttBorrow� (1)

BorrIntn � C � �1Arous � �2AttBorrow � �3� Arous � AttBorrow� (2)

The first model includes the need for material resources score (Matr), the attitude towards
borrowing (AttBorrow), and an interaction between the two (Matr � AttBorrow). The dependent
variable is the intention to borrow (BorrIntn). The null hypothesis, therefore, is that the
change in the intention to borrow that is induced by the attitude towards borrowing is the
same across individuals with different need for material resources. If interpreted carefully,
the coefficients on Matr, AttBorrow, and Matr � AttBorrow are sufficient to reveal the intention
to borrow differentials across all possible combinations of need for material resources and
the attitude towards borrowing relative to hypothetical base group defined by construction as
[Matr � 0, AttBorrow � 0]. See legend of Table 3 for more explanation.

The second model with the need for arousal trait is a replica of the first model and,
thus, is interpreted in an analogous manner. The parameters of second model are reported
in Table 4.

The results in Table 3 indicate that the interaction between the attitude towards borrowing
and the need for material resources is not consistent across all borrowing options; which
supports our core argument that borrowing options are not homogenous and are motivated
differently.

The coefficients on the interaction term, �2, are significantly positive in regressions 2, 3,
4, 7, and 8 that correspond to the intentions to apply for a mortgage, a home improvement
loan, a business loan, a personal loan, and a payday loan, respectively. This indicates that for
individuals with greater need for material resources, the attitude towards borrowing shows a
stronger association on the intention to use these borrowing options. This is consistent with
Hypothesis 3a.

An interesting find was that in regressions 2 through 8, the coefficients on the attitude
towards borrowing, �2, and the need for material resources, �1, are statistically indistin-
guishable from zero. This implies that neither the attitude towards borrowing nor the need for
material resources can, alone, influence one’s intentions to borrow.

Regression 1 corresponds to the intention to open a credit card account and seems to be
structurally different from other regressions. In particular, we observe that both �2 and �1 are
positive and statistically significant. This indicates that credit card borrowing is motivated
differently from other borrowing options. A more favorable attitude towards borrowing as
well as higher values of need for material resources induce stronger intentions for opening
a new credit card account. At the same time, we cannot reject the null that the interaction
between the two is insignificant.

As in Table 3, the results in Table 4 indicate that the interaction between the attitude
towards borrowing and the need for arousal is not consistent across all borrowing options;
which supports the argument that borrowing options are not homogenous and are, therefore,
motivated differently.

76 A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



T
ab

le
3

R
eg

re
ss

io
n

an
al

ys
es

w
ith

in
te

ra
ct

io
n

te
rm

s:
T

he
ne

ed
fo

r
m

at
er

ia
l

re
so

ur
ce

s

(1
)

C
re

di
t

ca
rd

(2
)

M
or

tg
ag

e
(3

)
H

om
e

im
pr

ov
em

en
t

lo
an

(4
)

B
us

in
es

s
lo

an
(5

)
A

ut
om

ob
ile

(6
)

St
ud

en
t

lo
an

(7
)

Pe
rs

on
al

lo
an

(8
)

Pa
yd

ay
lo

an

C
on

st
an

t
[C

]
0.

16
78

1.
90

42
**

*
1.

48
30

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1.
46

60
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2.

04
58

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1.

03
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31

47
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tt
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o
rr

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w

[�
2
]

0.
03

50
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59

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at

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sm

[�
1
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0.
28

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.0

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13
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41
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0.
02

05
In

te
ra

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io

n
[ �

3
]

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12
96

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68
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03
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60
df

.
R

eg
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ss
io

n
84

5
84

5
84

5
84

5
84

5
84

5
84

5
84

5
F-

st
at

e
41

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6

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9
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43
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36
27

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g.
0.

00
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00
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0.
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00
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00

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00
0

0.
00

0

N
ot

es
:

T
he

ta
bl

e
sh

ow
s

th
e

re
su

lts
of

ei
gh

ti
nt

er
ac

tio
n

re
gr

es
si

on
s

th
at

co
rr

es
po

nd
to

th
e

ei
gh

td
if

fe
re

nt
bo

rr
ow

in
g

in
te

nt
io

ns
ex

pl
or

ed
in

th
is

st
ud

y.
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ea
ch

m
od

el
,

w
e

in
te

ra
ct

th
e

at
tit

ud
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to
w

ar
ds

bo
rr

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in

g
sc

or
e

(A
tt

B
o
rr

o
w

)
w

ith
th

e
ne

ed
fo

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m

at
er

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l

re
so

ur
ce

s
(M

at
r

sc
or

e.
Sp

ec
ifi

ca
lly

,
w

e
ru

n
th

e
fo

llo
w

in
g

m
od

el
s: B

or
rI

nt
n

�
C

�
�

1
M

at
r

�
�

2
A

tt
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o
rr

o
w

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3
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at
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A

tt
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o
rr

o
w
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th
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g
in

te
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ab
le

th
at

ca
pt

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es

th
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sp

on
de

nt
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in
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nt
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to

us
e

a
ce

rt
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ty

pe
of

bo
rr

ow
in

g.
T

he
in

tr
od

uc
tio

n
of

an
in

te
ra

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io

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te

rm
in

a
re

gr
es

si
on

ca
lls

fo
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a
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fu

li
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pr

et
at

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of
th

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co

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fic

ie
nt

s
on

th
e

ot
he

r
va

ri
ab

le
s.

T
he

in
te

ra
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te
rm

M
at

r
�

A
tt

B
o
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o
w

ca
pt

ur
es

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e

in
cr

em
en

ta
l

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fe

ct
of

th
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at
tit

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to
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n
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rr

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r
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s
w

ith
gr

ea
te

r
ne

ed
fo

r
m

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lr

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ou

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gn
ifi

ca
nt

ly
po

si
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co

ef
fic

ie
nt

�
3

im
pl

ie
s

th
at

th
e

ne
ed

fo
r

m
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s

af
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ct
ho

w
th

e
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tit
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to

w
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in
g

ch
an

ge
s

on
e’

s
in

te
nt

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n

to
bo

rr
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ha

t
is

,a
si

gn
ifi

ca
nt

ly
po

si
tiv

e
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3
le

ad
s

to
th

e
co

nc
lu

si
on

th
at

th
e

at
tit

ud
e

to
w

ar
ds

bo
rr

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in

g
yi

el
ds

a
st

ro
ng

er
in

te
nt

io
n

to
bo

rr
ow

fo
r

in
di

vi
du

al
s

w
ith

gr
ea

te
r

ne
ed

fo
r

m
at

er
ia

l
re

so
ur

ce
s.

�
2

m
ea

su
re

s
th

e
im

pa
ct

of
th

e
at

tit
ud

e
to

w
ar

ds
bo

rr
ow

in
g

on
th

e
in

te
nt

io
n

to
bo

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in
th

e
ab

se
nc

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of

a
ne

ed
fo

r
m

at
er

ia
lr

es
ou

rc
es

.�
1

m
ea

su
re

s
th

e
im

pa
ct

of
th

e
ne

ed
fo

r
m

at
er

ia
lr

es
ou

rc
es

on
th

e
in

te
nt

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n

to
bo

rr
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w
he

n
th

e
at

tit
ud

e
to

w
ar

ds
bo

rr
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in
g

is
ze

ro
.T

he
re

fo
re

,t
he

�
3

co
ef

fic
ie

nt
su

pp
lie

s
a

di
re

ct
te

st
fo

r
H

yp
ot

he
si

s
3a

an
d

th
e

�
1

co
ef

fic
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nt
s

su
pp

ly
ad

di
tio

na
l

te
st

in
g

of
H

yp
ot

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si

s
1a

.
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st
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is
ks

de
no

te
st

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is

tic
al

si
gn

ifi
ca

nc
e

at
th

e
1%

(*
**

),
5%

(*
*)

,
or

10
%

(*
)

le
ve

l.

77A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



T
ab

le
4

R
eg

re
ss

io
n

an
al

ys
es

w
ith

in
te

ra
ct

io
n

te
rm

s–
T

he
ne

ed
fo

r
ar

ou
sa

l

(1
)

C
re

di
t

ca
rd

(2
)

M
or

tg
ag

e
(3

)
H

om
e

im
pr

ov
em

en
t

lo
an

(4
)

B
us

in
es

s
lo

an
(5

)
A

ut
om

ob
ile

(6
)

St
ud

en
t

lo
an

(7
)

Pe
rs

on
al

lo
an

(8
)

Pa
yd

ay
lo

an

C
on

st
an

t
[C

]
0.

68
60

*
1.

66
16

**
*

1.
63

23
**

*
1.

25
23

**
*

1.
52

19
**

*
1.

67
50

**
*

1.
34

18
**

*
1.

41
70

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*

A
tt

B
o
rr

o
w

[�
2
]

0.
02

22
**

�
0.

00
38

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0.

00
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00

86
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ee
d

fo
r

ar
ou

sa
l

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1
]

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61
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06

69
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0.
22

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*

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0.

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*

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te

ra
ct

io
n

[�
3
]

0.
00

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2
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03
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0.
07

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df

.
R

eg
re

ss
io

n
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5
84

5
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st
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N
ot

es
:

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he

ta
bl

e
sh

ow
s

th
e

re
su

lts
of

ei
gh

ti
nt

er
ac

tio
n

re
gr

es
si

on
s

th
at

co
rr

es
po

nd
to

th
e

ei
gh

td
if

fe
re

nt
bo

rr
ow

in
g

op
tio

ns
co

ns
id

er
ed

in
th

is
st

ud
y.

In
ea

ch
m

od
el

,
w

e
in

te
ra

ct
th

e
at

tit
ud

e
to

w
ar

ds
bo

rr
ow

in
g

sc
or

e
(A

tt
B

o
rr

o
w

)
w

ith
th

e
ne

ed
fo

r
ar

ou
sa

l
sc

or
e

(A
ro

us
).

Sp
ec

ifi
ca

lly
,

w
e

ru
n

th
e

fo
llo

w
in

g
m

od
el

s:

B
or

rI
nt

n
�

C
�

�
1
A

ro
us

�
�

2
A

tt
B

o
rr

o
w

�
�

3
�A

ro
us

�
A

tt
B

o
rr

o
w
�

B
or

rI
nt

n
is

th
e

bo
rr

ow
in

g
in

te
nt

io
n

va
ri

ab
le

th
at

ca
pt

ur
es

th
e

re
sp

on
de

nt
s’

in
te

nt
io

n
to

us
e

a
ce

rt
ai

n
ty

pe
of

bo
rr

ow
in

g.
A

s
ex

pl
ai

ne
d

in
T

ab
le

3
ab

ov
e,

a
si

gn
ifi

ca
nt

ly
po

si
tiv

e
�

3
im

pl
ie

s
th

at
th

e
at

tit
ud

e
to

w
ar

ds
bo

rr
ow

in
g

yi
el

ds
a

st
ro

ng
er

in
te

nt
io

n
to

bo
rr

ow
fo

r
in

di
vi

du
al

s
w

ith
gr

ea
te

r
ne

ed
fo

r
ar

ou
sa

l.
�

2

m
ea

su
re

s
th

e
im

pa
ct

of
th

e
at

tit
ud

e
to

w
ar

ds
bo

rr
ow

in
g

on
th

e
in

te
nt

io
n

to
bo

rr
ow

in
th

e
ab

se
nc

e
of

a
ne

ed
fo

r
ar

ou
sa

l.
�

1
m

ea
su

re
s

th
e

im
pa

ct
of

th
e

ne
ed

fo
r

ar
ou

sa
l

on
th

e
in

te
nt

io
n

to
bo

rr
ow

w
he

n
th

e
at

tit
ud

e
to

w
ar

ds
bo

rr
ow

in
g

is
ze

ro
.T

he
re

fo
re

,t
he

�
3

co
ef

fic
ie

nt
s

su
pp

ly
a

di
re

ct
te

st
fo

r
H

yp
ot

he
si

s
3b

an
d

th
e

�
1

co
ef

fic
ie

nt
s

su
pp

ly
ad

di
tio

na
l

te
st

in
g

of
H

yp
ot

he
si

s
1b

.
A

st
er

is
ks

de
no

te
st

at
is

tic
al

si
gn

ifi
ca

nc
e

at
th

e
1%

(*
**

),
5%

(*
*)

,
or

10
%

(*
)

le
ve

l.

78 A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



The coefficients on the interaction term, �3, are significant and positive in regressions 3,
4, 6, 7, and 8 that correspond to the intentions to apply for a home improvement loan, a
business loan, a student loan, a personal loan, and a payday loan, respectively. This indicates
that the attitude towards borrowing has a stronger relationship with the intention to borrow
for individuals with higher levels of need for arousal. This is consistent with Hypothesis 3b.

In regressions 2 through 8, the coefficients on the attitude towards borrowing score, �2,
and are statistically indistinguishable from zero. This implies that the attitude towards
borrowing cannot, alone, influence one’s intentions to borrow. In regression 1, only �2 is
positive and statistically significant. This indicates that a more favorable attitude towards
borrowing induces a stronger intention for opening a new credit card account. It also
indicates that we cannot reject the null that the interaction between the attitude towards
borrowing and the need for arousal is insignificant.

3.6. Discussion of findings

Consistent with previous research and in line with behavioral finance theories, the results
suggest that psychological characteristics impact individuals’ financial choices. In addition,
our findings are generally in line with the behavioral influence perspective of consumer
financial decision making. Nevertheless, this research adds several new perspectives to the
literature on financial behavior and personal characteristics.

We document evidence that greater values of need for material resources and need for
arousal are associated with stronger intentions to borrow. This lends support to Hypotheses
1a and H1b. We also show that for individuals who score higher on need for material
resources, the positive association between attitude towards borrowing and the intention to
borrow is significantly stronger relative to individuals with a lesser need for materials
resources. This supports Hypothesis 3a. The same finding extends to the need for arousal trait
that is consistent with Hypothesis 3b.

Furthermore, the overall results support a few overarching suppositions tested in this
article. First, the attitude towards borrowing and the intention to borrow are not interchange-
able. In fact, the intention to borrow is sometimes inconsistent with the borrower’s attitude
towards borrowing. This is consistent with Hypothesis 2. Second, the fact that we were able
to document an interaction effect in only a subset of borrowing options indicates that
borrowing options are not homogenous and are motivated differently. A further discussion
of this issue is supplied in the conclusion section.

Finally, our analyses take into account conventional controls used in extant literature.
We did not find fundamental deviations from previous findings (i.e., we found that
attitudinal biases towards money, wealth, indebtedness, planning as well as financial
knowledge and other demographics impact borrowing behavior in a predictable manner).

4. Conclusions and implications

The present research is an interdisciplinary approach to investigate household’s financial
borrowing decisions in the light of psychological characteristics of individuals. The review

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of extant literature reveals a three-fold gap in household borrowing research. First, the role
of personality traits in household finance remains an area that should be investigated. The
extant research has mainly focused on the Big Five personality traits and has not examined
the extensions by the more comprehensive 3M model of motivation and personality. Spe-
cifically, the need for material resources and the need for arousal traits have not been fully
explored. Second, current literature has often applied attitude toward a behavior and intention
for the behavior interchangeably. Third, borrowing behavior has been defined too broadly
with minimal attention to the fact that the ultimate purpose of the borrowing might influence
the decision to borrow.

The present research is an effort to address the aforementioned gaps. First, we use an
extended version of the Big Five model of personality that includes, in addition to the
conventional five traits, the two additional personality traits mentioned above. Second, we
make a clear distinction between the attitude towards borrowing and the intention to borrow.
Finally, we consider a wide spectrum of borrowing behaviors defined by the SCF adminis-
tered by the Federal Reserve.

The findings are insightful and present several practical and academic implications. First,
our analyses indicate that the two additional personality traits, the need for material resources
and the need for arousal, play a significant role in shaping borrowing behavior. Second, our
findings indicate the importance of making a clear distinction between the attitude towards
borrowing and the intentions to borrow. The attitude towards borrowing and the intention to
borrow do not always accord, and the inconsistency between the two varies across person-
alities. In other words, our results provide evidence for the interaction between personality
and attitudes towards borrowing on intentions for specific borrowing options. Third, we
demonstrate that different borrowing options are not homogenous and more importantly, are
motivated differently across personalities. Intuitively, the attitude towards borrowing influ-
ences the intention to borrow. Our finding, however, shows that this intuitive relationship is
not consistent across different borrowing options and is greatly influenced by the borrower’s
personality characteristics.

Overall, individuals with greater need for material resources find happiness in owning
material wealth. They view possessions as means of achieving utility and social status as
opposed to comfort and pleasure (Richins & Dawson, 1992). Therefore, they are more
willing to carry the burden of a loan in exchange for psychological satisfactions. Their
borrowing behavior, therefore, is marked by stronger urge to possess material wealth. We
find that for individuals with greater need for material resources, the impact of the attitude
towards borrowing on the intention to borrow is significantly intensified in mortgages,
home improvement loans, business loans, personal loans, and payday loans. The same is not
true for automobile loans, credit cards, and student loans. We find this divergence well-
explained by the psychological characteristics of individuals with greater need for material
resources. They are more concerned about their social image compared to those who score
lower on this trait (Christopher, Marek, & Carroll, 2004) and, therefore, they have a stronger
urge to own a home, improve their home, and own a business. These individuals are more
likely to spend money on themselves than on others and they contribute less money to
charities (Richins & Dawson, 1992) that explains why they have stronger intention to obtain
personal loans. Finally, they are more likely to get engaged in compulsive buying (Mowen,

80 A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



2000; Mowen & Spears, 1999) that explains the stronger intention for payday loans.
Arguably, they are willing to carry the burden of the debt to satisfy their psychological need
to spend and own personal items immediately (as opposed to wait and save up for them).

In contrast, individuals who have greater need for arousal derive happiness from the
purchasing experience itself and, thus, they enjoy the frequency of purchasing (Licata,
Mowen, Harris, & Brown, 2003; Mehrabian & Russell, 1974). Therefore, they spend more
on frequent purchases including impulse purchases and less on big ticket items. We find that
their borrowing pattern is consistent with their psychological characteristics. For individuals
with greater need for arousal, the association between attitude towards borrowing and the
intention to borrow is significantly stronger in the case of home improvement loans, business
loans, student loans, personal loans, and payday loans. The same is not true for mortgages,
automobile loans, and credit cards. In fact, the intention for credit cards and automotive loans
seems to be independent of the borrower’s personality. This finding is consistent with the
anecdotal evidence of the wide prevalence of these types of borrowing options in the society.

Despite the aforementioned contributions, the findings of this research are limited in terms
of generalizability because of our sample size. Our findings, however, pave the road for
future research in this area that could span beyond academia. For marketers of financial
services, our findings suggest that personality traits of individual and their associated
inherent tendencies should be considered when communicating with borrowers. More spe-
cifically, since personality traits are associated with different borrowing decisions, it is
expected that different groups of individuals with varying personality traits should react
differently to marketing efforts. As such, borrowers can be categorized based on their
personality traits and attitudes towards certain borrowing options and approached differently.
We encourage future research to follow experimental designs and examine such differences.

Moreover, in consumer profiling and target market selections fields, more research may
explore the possibility that the attitude towards borrowing and the intention to borrow are not
always consistent. Our results identify the moderating role of personality traits as a boundary
condition that provides insights on these inconsistencies. Future research is encouraged to identify
additional boundary conditions. Our results also highlight the importance of psychological
characteristics in financial decisions. According, this research calls for more research by social
planners, legislators, personal financial planners, and educators. We specifically recommend
more research on how personal differences shape household’s financial behaviors.

Notes

1 Our analysis also incorporates individuals’ attitude towards financial planning and
money, borrowing history and self-evaluation of one’s finances and financial decision-
making abilities. These factors are largely ignored by previous studies.

2 Standard controls for demographics, knowledge, and financial endowment are also
considered. See for example Ryack and Sheikh (2016), Balasubramnian and Brisker
(2016), and Docking, Fortin, and Michelson (2013).

3 There are two distinct approaches for studying personality, namely the psychoanalytic
theory and the trait theory. The trait Theory focuses on various personality traits and

81A. Yazdanparast, Y. Alhenawi / Financial Services Review 26 (2017) 55–85



their impact on consumer decisions. This theory has been used in two approaches. One
approach argues that people have the same set of traits, but these traits are manifested
dissimilarly. The second approach argues that individual variances are because of
different combinations of each trait varying from one individual to another (Lin,
2010). In fact, the theoretical mechanism through which individual differences influ-
ence decisions is rooted in the social cognition research perspective (Witte and
Morrison, 2000). According to this perspective, individual differences influence indi-
viduals’ perceptions of the world and environmental stimuli (Fiske & Taylor, 1991)
and, thus, can influence their behavior.

4 See Davey and George (2011) for a detailed discussion of these traits. Openness to
experience is the general interest in finding novel solutions and original ideas, and the
tendency to use the imagination in performing activities. This trait is associated with
being open to ideas and values and trying new things that could potentially be costly.
Conscientiousness is the need to be organized and efficient in tasks and is defined as
the extent to which individuals are careful and self-disciplined. Conscientious indi-
viduals are organized, hard-working, and reliable as opposed to carefree individuals
who score lower on this trait. Extroversion is the tendency to be warm blooded,
friendly, and sociable. Agreeableness is the need to express kindness and sympathy to
others. Scoring low on this trait shows higher levels of self-interest. As a result,
low-agreeable individuals have higher tendencies to hoard their money and engage in
frugal practices rather than extravagance. Neuroticism is the tendency to be emotional,
moody and temperamental. Neurotic individuals are more likely to experience nega-
tive emotions and are more susceptible to stress. Scoring high on neuroticism indicates
lack of emotional stability and self-control, which results in taking more emotional/
impulsive decisions and less planned/controlled ones.

5 Physical/body needs are related to devoting more time to improve one’s body on a
daily basis. Those who score higher on this trait work hard to keep their bodies healthy
and in good shape (Mowen, 2000) and have active lifestyles. This trait is, therefore,
not related to borrowing behavior or attitude toward borrowing (Pirog & Roberst,
2007) and is not included in our analyses.

6 This is a simple yes/no question with a text box that allows respondents, if they wish, to
specify the nature of the event. About a third of respondents cited events related to work
(e. g. promotion) or personal life (e. g. marriage, divorce). The corresponding binary
variable, however, was found to have insignificant impact on borrowing behavior.

7 However, it is higher than non-U. S.-based studies. For instance, the averages reported
by Larkin, Lucey, and Mulholland, 2013 who used the same risk tolerance quiz on an
Irish sample fall in the 20 to 30% range.

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