The interplay of financial literacy, digital finance adoption, and behavioral biases in investment decision-making: A integrated model for emerging markets

Abstract

This research addresses a critical gap in contemporary financial scholarship by developing an integrated theoretical framework that examines the complex interrelationships between financial literacy, digital finance adoption, and behavioral biases in investment decision-making within the Vietnamese emerging market context. The study transcends traditional siloed approaches that have examined these constructs in isolation, instead offering a conceptually integrated model that captures their multidirectional relationships. Drawing on a sophisticated methodological architecture, this study employs structural equation modeling (SEM) with data collected from 452 retail investors in Vietnam. The quantitative analysis is complemented by fuzzy-set qualitative comparative analysis (fsQCA) to identify configurational pathways to investment success. The epistemic trajectory reveals that digital financial literacy serves as both a mediator and a moderator in the relationship between behavioral biases and investment decisions in the Vietnamese context. Multigroup analysis further illuminates substantial heterogeneity across demographic segments, with particularly pronounced digital literacy effects among younger investors. The hermeneutic analysis uncovers how overconfidence and herding biases manifest within Vietnam's digitally-mediated investment environments, reflecting distinctive cultural and institutional characteristics. This research develops a comprehensive integration of financial literacy, digital adoption, and behavioral finance theories, advancing a nuanced understanding of investment behavior that accounts for the institutional, technological, and psychological dimensions unique to Vietnam's emerging market context.