The Interplay Between Financial Literacy, Financial Risk Tolerance, and Financial Behaviour: The Moderator Effect of Emotional Intelligence

AIM: This study aims to examine financial literacy’s impact on individual investors’ financial behaviour while also investigating the mediating role of financial risk tolerance and the moderator effect of emotional intelligence. METHODS: The study collects time-lagged data from 389 financially independent individual investors from leading educational institutes in Pakistan. Data are analysed using SmartPLS (v 3.3.3) to test the measurement and structural models. RESULTS: The findings reveal that financial literacy significantly impacts the financial behaviour of individual investors. In addition, financial risk tolerance partially mediates the relationship between financial literacy and financial behaviour. Besides, the study found a significant moderating role of emotional intelligence in the direct relationship between financial literacy and financial risk tolerance and an indirect relationship between financial literacy and financial behaviour. DISCUSSION: The study examined a hitherto unexplored relationship between financial literacy and financial behaviour, mediated by financial risk tolerance and moderated by emotional intelligence.