Financial Literacy, Self-Efficacy and Stock Markets Participation: A Case of Uganda Securities Exchange

Abstract

The study sought to examine the relationship between financial literacy, self-efficacy and stock markets participation at the Uganda Securities Exchange. Particularly, it focused on examining the relationship between financial literacy and stock markets participation, the relationship between self-efficacy and stock markets participation and the effect of financial literacy and selfefficacy on stock markets participation in Uganda. The study used a cross sectional research design, which followed a quantitative research approach. The population for the study comprised 160 individuals sourced from stock markets participants such as stock brokerage firms, master’s students and businessmen in Kampala. The sample consisted of 113 respondents. This study employed simple random sampling, purposive sampling, and convenience sampling techniques to select the sample. Data was collected through questionnaire survey. Some supplementary interviews were conducted. Documented information supplemented the primary data. The collected data was analysed through SPSS. The findings revealed that there was a high significant positive relationship between financial literacy and stock markets participation. The study further found that the relationship between self-efficacy and stock markets participation was significantly positive where by the change in self-efficacy significantly leads to a change in one’s participation in the stock market. The findings also disclosed that financial literacy and self-efficacy had a positive effect on stock markets participation. It was thus discovered that possessing the requisite financial knowledge supplemented by the mediating effect of self-efficacy behavioural mechanisms induces and maintains the investment made in purchasing shares of publicly listed companies. As a key recommendation, there should be financial counsellors to instil notions of financial literacy and self-efficacy right from an individual’s early age in order to drive stock market investments.