The Role of Greed in Moderating Factors That Enhance Investment Decisions
Abstract
The study aims to empirically test the effects of risk tolerance, social networks and financial literacy on individual investment decisions in the Ponzi scheme in Indonesia. In this study, greed is used as a moderating variable. A questionnaire distributed online obtained a total sample of 402 individual investors who were or had invested in the Ponzi Scheme. Data was analyzed with structural equation modelling-partial least square (SEM-PLS). The results demonstrate that risk tolerance, social networks and financial literacy affect individual investment decision-making in the Ponzi scheme. Meanwhile, greed does not moderate the relationship between risk tolerance, social network and financial literacy in individual decision-making in a Ponzi scheme. The findings of this study confirm that risk tolerance drives individuals to invest in risky schemes such as Ponzi. Risk-tolerant individuals tend to take the opportunity to make money from the Ponzi scheme. Social networks are also shown to have a significant effect on individual investment decisions in Ponzi schemes. Information obtained by the individuals through interactions with their social environment, both face-to-face and social media, strengthens the intention to join Ponzi scheme investments. Meanwhile, good financial literacy makes individuals more optimistic and confident to invest in Ponzi. Greed does not moderate the effects of risk tolerance, social networks and financial literacy on individual investment decisions in a Ponzi scheme.
References
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[26] Mahmood, F., et al. (2024). Impact of Behavioral Biases on Investment Decisions and the Moderation Effect of Financial Literacy; an Evidence of Pakistan. Acta Psychologica, 247. DOI:https://doi.org/10.1016/j.actpsy.2024.104303
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[28] Mussel, P., Reiter, A. M.F., Osinsky, R. and Hewig, J. (2015). State- and Trait-Greed, Its Impact on Risky Decision-Making and Underlying Neural Mechanisms. Social Neuroscience, 10 (2): 126–34. DOI:https://doi.org/10.1080/17470919.2014.965340
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[31] Onoh, J. O., and Eze, G. P. (2018). Ponzi Schemes in Nigeria Demographic Assessment of Attitudes to Risk and the Role of Greed and Fear in the Market. Journal of Business and African Economy, 4 (1).
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[34] Ouimet, P., and Tate, G. (2017). Learning From Coworkers: Peer Effects on Individual Investment Decisions.
[35] Quisenberry, W. L. (2017). Ponzi of All Ponzis: Critical Analysis of the Bernie Madoff Scheme. International Journal of Econometrics and Financial Management, 5 (1): 1–6.
[36] Rasool, N., and Ullah, S. (2020). Financial Literacy and Behavioural Biases of Individual Investors: Empirical Evidence of Pakistan Stock Exchange. Journal of Economics, Finance and Administrative Science, 25 (50): 261–78. DOI: https://doi.org/10.1108/JEFAS-03-2019-0031
[37] Sahi, S. K., Arora, A. P. and Dhameja, N. (2013). An Exploratory Inquiry into the Psychological Biases in Financial Investment Behavior. Journal of Behavioral Finance, 14 (2): 94–103.
[38] Schmidt, J. B., and Spreng, R. A. (1996). A Proposed Model of External Consumer Information Search. Journal of the Academy of Marketing Science, 24 (3): 246–56. DOI: 10.1177/0092070396243005
[39] Shiller, R. J. (2014). Speculative Asset Prices. American Economic Review, 104:1486–1517.
[40] Simon, B. H. A. (1952). A Behavior Model of Rational Choice. Quarterly Journal of Economics Journal of Economics, 99–118.
[41] Sobaih, A. E. E., and Elshaer, I. A. (2023). Risk-Taking, Financial Knowledge, and Risky Investment Intention: Expanding Theory of Planned Behavior Using a Moderating-Mediating Model. Mathematics, 11 (2): 453.
[42] Sutejo, B. S., et al. (2023). Do Emotions Influence the Investment Decisions of Generation Z Surabaya Investors in the Covid-19 Pandemic Era? Does Financial Risk Tolerance Play a Moderating Role? Scientific Papers of the University of Pardubice, Series D: Faculty of Economics and Administration, 31 (2). DOI:https://doi.org/10.46585/sp31021755
[43] Tennant, D. (2011). Why Do People Risk Exposure to Ponzi Schemes? Econometric Evidence from Jamaica. Journal of International Financial Markets, Institutions and Money, 21 (3): 328–46. DOI:https://doi.org/10.1016/j.intfin.2010.11.003
[44] Trimpop, R. M. (1994). The Psychology of Risk-Taking Behavior. Elsevier.
[45] Ward, S. (1974). Consumer Socialization. Journal of Consumer Research, 1–14.
[46] Wilkins, A. M., Acuff, W. W. and Hermanson, D. R. (2012). Understanding a Ponzi Scheme: Victims’ Perspectives. Journal of Forensic & Investigative Accounting, 4(1).
[47] OJK. (2023). Rapat Koordinasi Tim Kerja Satgas Waspada Investasi Daerah Provinsi Kalimantan Selatan Semester I Tahun 2023. (in Indonesian)
[2] Bado, B., Hasan, M. Tahir, T. and Hasbiah, S. (2023). How Do Financial Literacy, Financial Management Learning, Financial Attitudes and Financial Education in Families Affect Personal Financial Management in Generation Z? International Journal of Professional Business Review, 8 (5): 01–29.
[3] Badua, J. (2020). The Nature and Victimization of Investment Frauds. Northwestern University, Philippines.
[4] Baruah, M., and Parikh, A. K. k. (2018). Impact of Risk Tolerance and Demographic Factors on Financial Investment Decision. GIS Business, 13 (5): 31–40. DOI: https://doi.org/10.26643/gis.v13i5.3270
[5] Cardella, E., Kugler, T., Anderson, J. and Connolly, T. (2019). Is Greed Contagious? Four Experimental Studies. Journal of Behavioral Decision Making, 32 (5): 579–98. DOI: https://doi.org/10.1002/bdm.2134
[6] Chambers, C. D., and Tzavella, L. (2022). The Past, Present and Future of Registered Reports. Nature Human Behaviour, 6 (1): 29–42.
[7] Chimaobi, C., and Perpetua, N. (2020). Factors Influencing Undergraduates’ Involvement in Ponzi Schemes in Tertiary Institutions in Anambra State, South-East, Nigeria. Journal of Sociology Nnamdi Azikiwe University Awka, 7 (1).
[8] Deane-Cox, S. (2014). “Retranslation.”
[9] Dupuis, D., Smith, D. and Gleason, K. (2023). Old Frauds with a New Sauce: Digital Assets and Space Transition. Journal of Financial Crime, 30 (1): 205–20. DOI: https://doi.org/10.1108/JFC-11-2021-0242
[10] Fei, L., et al. (2021). The Profile of Ponzi Scheme Victims in China and the Characteristics of Their Decision-Making Process. Deviant Behavior, 42 (12): 1596–1609. DOI: 10.1080/01639625.2020.1768639
[11] Greenspan, S. (2009). Annals of Gullibility: Why We Get Duped and How to Avoid It. Praeger Publishers.
[12] Hair, J. F., et al. (2022). Predictive Model Assessment and Selection in Composite-Based Modeling Using PLS-SEM: Extensions and Guidelines for Using CVPAT. European Journal of Marketing, 57 (6): 1662–77.
[13] Hinduan, Z. R., Anggraeni, A. and Irfan Agia, M.I. (2020). Generation Z in Indonesia: The Self-Driven Digital. The New Generation Z in Asia: Dynamics, Differences, Digitalization, 121–34. DOI:https://doi.org/10.1108/978-1-80043-220-820201012
[14] Hinvest, N. S., Alsharman, M., Roell, M. and Fairchild, R. (2021). Do Emotions Benefit Investment Decisions? Anticipatory Emotion and Investment Decisions in Non-Professional Investors. Frontiers in Psychology, 12:705476.
[15] Hinz, R. P., McCarthy, D. D. and Turner, J. A. (1997). Are Women Conservative Investors? Gender Differences in Participant-Directed Pension Investments. Positioning Pensions for the Twenty-First Century, 91:103.
[16] Kaufman, B. E. (1999). Emotional Arousal as a Source of Bounded Rationality.” Journal of Economic Behavior & Organization, 1 (38): 135–144.
[17] Kempe, D., Kleinberg, J. and Tardos, É. (2015). Maximizing the Spread of Influence through a Social Network. Theory of Computing, 11:105–47. DOI: https://doi.org/10.4086/toc.2015.v011a004
[18] Khababa, N., and Ahmadjonov, A. (2023). Investors Behaviour and Psychological Factors Impact on Saudi Arabia Stock Market Sustainability through Investment Decisions. Cuadernos de Economía Www.Cude.Es, 46 (132): 202–212.
[19] Khan, M. S., Azad, I., Moosa, S. and Javed, M.Y. (2024). Do We Really Need Financial Literacy to Access the Behavioral Dynamics of Generation Z? A Case of Oman. Heliyon, 10 (13). DOI:https://doi.org/10.1016/j.heliyon.2024.e32739
[20] Lerner, R. M., Lerner, J. V., Bowers, E. and Geldhof, G. J. (2015). Positive Youth Development and Relational‐developmental‐systems. Handbook of Child Psychology and Developmental Science, 1–45.
[21] Lewis, M. K. (2012). New Dogs, Old Tricks. Why Do Ponzi Schemes Succeed? Accounting Forum, 36 (4): 294–309. DOI: https://doi.org/10.1016/j.accfor.2011.11.002
[22] Lin, Q., and Lee, J. (2002). Consumers’ Information Search When Making Investment Decisions: Vol. PhD Thesis. Issue University of Georgia.
[23] Loke, Y. J. (2017). Financial Vulnerability of Working Adults in Malaysia. Contemporary Economics, 11 (2): 205–18. DOI: https://doi.org/10.5709/ce.1897-9254.237
[24] Ma, K. W. F., and McKinnon, T. (2022). COVID-19 and Cyber Fraud: Emerging Threats during the Pandemic. Journal of Financial Crime, 29 (2): 433–46.
[25] Magessi, N. T., and Antunes, L. (2013). Agent’s Fear Monitors the Spread of Greed in a Social Network.
[26] Mahmood, F., et al. (2024). Impact of Behavioral Biases on Investment Decisions and the Moderation Effect of Financial Literacy; an Evidence of Pakistan. Acta Psychologica, 247. DOI:https://doi.org/10.1016/j.actpsy.2024.104303
[27] Mohammed, U. (2021). Effect of Ponzi Schemes on a Country: The Case of Ghana. Journal of Financial Crime, 28 (3): 926–39. DOI: https://doi.org/10.1108/JFC-09-2020-0177
[28] Mussel, P., Reiter, A. M.F., Osinsky, R. and Hewig, J. (2015). State- and Trait-Greed, Its Impact on Risky Decision-Making and Underlying Neural Mechanisms. Social Neuroscience, 10 (2): 126–34. DOI:https://doi.org/10.1080/17470919.2014.965340
[29] Nataraj-Hansen, S. (2024). ‘More Intelligent, Less Emotive and More Greedy’: Hierarchies of Blame in Online Fraud. International Journal of Law, Crime and Justice, 76. DOI: https://doi.org/10.1016/j.ijlcj.2024.100652
[30] Nguyen, L., Gallery, G. and Newton, C. (2019). The Joint Influence of Financial Risk Perception and Risk Tolerance on Individual Investment Decision-Making. Accounting and Finance, 59 (S1): 747–71. DOI:https://doi.org/10.1111/acfi.12295
[31] Onoh, J. O., and Eze, G. P. (2018). Ponzi Schemes in Nigeria Demographic Assessment of Attitudes to Risk and the Role of Greed and Fear in the Market. Journal of Business and African Economy, 4 (1).
[32] Oppong, C., et al. (2023). Financial Literacy, Investment and Personal Financial Management Nexus: Empirical Evidence on Private Sector Employees. Cogent Usiness & Management, 10 (2): 2229106.
[33] Ostrovsky-Berman, E., and Litwin, H. (2019). Social Network and Financial Risk Tolerance among Investors Nearing and during Retirement. Journal of Family and Economic Issues, 40:237–49.
[34] Ouimet, P., and Tate, G. (2017). Learning From Coworkers: Peer Effects on Individual Investment Decisions.
[35] Quisenberry, W. L. (2017). Ponzi of All Ponzis: Critical Analysis of the Bernie Madoff Scheme. International Journal of Econometrics and Financial Management, 5 (1): 1–6.
[36] Rasool, N., and Ullah, S. (2020). Financial Literacy and Behavioural Biases of Individual Investors: Empirical Evidence of Pakistan Stock Exchange. Journal of Economics, Finance and Administrative Science, 25 (50): 261–78. DOI: https://doi.org/10.1108/JEFAS-03-2019-0031
[37] Sahi, S. K., Arora, A. P. and Dhameja, N. (2013). An Exploratory Inquiry into the Psychological Biases in Financial Investment Behavior. Journal of Behavioral Finance, 14 (2): 94–103.
[38] Schmidt, J. B., and Spreng, R. A. (1996). A Proposed Model of External Consumer Information Search. Journal of the Academy of Marketing Science, 24 (3): 246–56. DOI: 10.1177/0092070396243005
[39] Shiller, R. J. (2014). Speculative Asset Prices. American Economic Review, 104:1486–1517.
[40] Simon, B. H. A. (1952). A Behavior Model of Rational Choice. Quarterly Journal of Economics Journal of Economics, 99–118.
[41] Sobaih, A. E. E., and Elshaer, I. A. (2023). Risk-Taking, Financial Knowledge, and Risky Investment Intention: Expanding Theory of Planned Behavior Using a Moderating-Mediating Model. Mathematics, 11 (2): 453.
[42] Sutejo, B. S., et al. (2023). Do Emotions Influence the Investment Decisions of Generation Z Surabaya Investors in the Covid-19 Pandemic Era? Does Financial Risk Tolerance Play a Moderating Role? Scientific Papers of the University of Pardubice, Series D: Faculty of Economics and Administration, 31 (2). DOI:https://doi.org/10.46585/sp31021755
[43] Tennant, D. (2011). Why Do People Risk Exposure to Ponzi Schemes? Econometric Evidence from Jamaica. Journal of International Financial Markets, Institutions and Money, 21 (3): 328–46. DOI:https://doi.org/10.1016/j.intfin.2010.11.003
[44] Trimpop, R. M. (1994). The Psychology of Risk-Taking Behavior. Elsevier.
[45] Ward, S. (1974). Consumer Socialization. Journal of Consumer Research, 1–14.
[46] Wilkins, A. M., Acuff, W. W. and Hermanson, D. R. (2012). Understanding a Ponzi Scheme: Victims’ Perspectives. Journal of Forensic & Investigative Accounting, 4(1).
[47] OJK. (2023). Rapat Koordinasi Tim Kerja Satgas Waspada Investasi Daerah Provinsi Kalimantan Selatan Semester I Tahun 2023. (in Indonesian)
Published
2025-06-30
How to Cite
NOSITA, Firda et al.
The Role of Greed in Moderating Factors That Enhance Investment Decisions.
Theoretical and Practical Research in Economic Fields, [S.l.], v. 16, n. 2, p. 471-481, june 2025.
ISSN 2068-7710.
Available at: <https://journals.aserspublishing.eu/tpref/article/view/8937>. Date accessed: 30 july 2025.
doi: https://doi.org/10.14505/tpref.v16.2(34).16.
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