How the Interplay Between Subjective and Objective Financial Risk Influences Consumers’ Expectations, Information Search, and Product Satisfaction

Consumer risk taking is central to much of the financial market literature and a deeper understanding of consumer risk behavior is essential for advancing research and managers’ and authorities’ thought and policy. Yet, relatively little research has considered the interplay between subjective financial risk (i.e., the level of risk perceived by consumers) and objective financial risk (i.e., the level of risk as stated by financial authorities) on consumer financial behavior. Based on cognitive consistency theory and cognitive congruence theory as theoretical underpinnings, we develop a conceptual model hypothesizing relationships between subjective and objective risk and consumers’ expectations, information search (from both financial and non-financial sources), and product satisfaction. This study distinguishes between high objective risk savings products (HRSP) (i.e., stocks) and low objective risk savings products (LRSP) (i.e., bank saving accounts). In the study, 269 respondents had obtained a HRSP and 573 respondents had obtained a LRSP. In the pooled sample of respondents (n=842), 46.6% were women and average age was 54.5 years. Structural equation modelling estimated the results. The results suggest that the negative influence of perceived risk on expectations was significantly higher for LRSP than for HRSP and also that the negative influence of perceived risk on product satisfaction was significantly higher for LRSP than for HRSP. Also, the positive influence of perceived risk on information search from non-financial sources was higher for HRSP than for LRSP. Several implications for future research, alongside with managerial and financial authority implications, are discussed.