Institutional Repository | Satya Wacana Christian University: Compulsive Buying Behavior: The Effects of Pocket Money, Peer Acceptance, Money Retention And Its Impact On Borrowing Habit T2 912012034 BAB I
CHAPTER I
INTRODUCTION
1.1.
Background of the Study
Economic theories basically claim that purchases are made to obtain
utility. In fact there are a lot of people making purchases to get satisfaction
from the purchasing process instead of obtaining utility. Dittmar (2005)
argued that these kind of people make purchases to improve their mood as
well as to increase their confidence, while DeSarbo & Edwards (1996) stated
that these people make purchases to escape from stress and anxiety. These
people are called compulsive buyers by O’Guinn dan Faber (1989). The
behavior shown by compulsive buyers in the study of consumer behavior is
called compulsive buying behavior (CBB). The process of buying is
considered as pleasurable action to compulsive buyers that they are often
labeled as the hedonists.
There are a lot of people who suffer from being compulsive buyers,
it is because CBB can lead to addictive shopping behavior and many other
negative consequences. A high tendency of CBB is found in India by Jalees
(2007) as well as in Thailand and China (Guo & Cai, 2011). This behavior is
often classified as a behavioral disorder that need to be prevented or removed
from them who are now suffering from their CBB.
1
The emergence of this behavior is caused by some internal factors,
supported by various external factors. Guo & Cai (2011) in their
investigation found that pocket money is a common factor that predict CBB
across nations, where people with higher pocket money are more likely to do
CBB. Another external determinant of CBB according to Moschis et al.
(2013) is the influence of peers. People who are not accepted by their peers
or having low peer acceptance are less likely to do CBB than those accepted
(high peer acceptance). In addition to both external factors explained above,
money retention is also proved as another determinant of CBB. People who
are not careful in using their money are more likely to do CBB (Li et al.,
2009).
Furthermore, while it is caused by some factors, according to Ergin
(2010) CBB can also cause some problems for the compulsive buyers
themselves, their family, friends, and their colleagues. One example of these
problems is that many compulsive buyers would have trouble with their debt.
In case of having one or more credit cards, Wilczaki (2006) found that many
compulsive buyers have been crippled by their debt. When compulsive
buyers don’t have credit card it is possible that the effect is on their
borrowing habit, because they probably will borrow money from their
parents and friends to make purchases. Borrowing habit can lead to other
negative effects, for example when compulsive buyers can not pay the
2
money they borrow from their friends for more than twice then it probably
will break their friendship.
It is also possible that borrowing habit itself can be affected by
pocket money, peer acceptance, and money retention. People with higher
pocket money may borrow money more often because they believe that they
have the ability to pay back, vice versa. In case of peer acceptance, people
who feel accepted by their peers will have greater chance to borrow money
from their peers. If it is linked to money retention, it isn’t hard to imagine
that people who are carefully using their money will rarely borrow money.
The reason is because they are good in managing their money to make it
enough for them or in case that they need a little extra money, they will try to
find another way to get it instead of borrowing.
Many studies have been conducted in the areas of CBB, especially
within the scope of marketing. Four of them are the study conducted by
Handan & Sun (2008) that examine the relationship between CBB with
online sales promotion and the study carried out by Jalees (2007); Shafii
(2008); & Man (2012) that explore the determinants of CBB. The studies
mentioned above simply analyze the determinants of CBB and investigate
the influence of some determinant factors of CBB, without further analysis
about the impact of CBB to borrowing habit.
3
At least there are two reasons for performing this study. The first
reason is that generally previous studies focus only in the field of marketing
by using marketing variables as the independent variables. Therefore there
are still limited studies carried out in the field of finance by framing CBB
using financial variables as the independent or dependent variables. The
second reason is previous studies only investigate the effect of several
independent variables on CBB, have unable to establish a connection
between CBB and its impacts.
1.2. Research Problems
1. Do pocket money, peer acceptance, and money retention have
significant effect on CBB?
2. Do pocket money, peer acceptance, and money retention have direct
significant effect on borrowing habit?
3. Does CBB mediate the effect of pocket money, peer acceptance,
and money retention on borrowing habit?
4
1.3. Purpose of the Study
1. To analyze the effect of pocket money, peer acceptance, and money
retention on CBB.
2. To analyze the direct effect of pocket money, peer acceptance, and
money retention on borrowing habit.
3. To analyze the mediating role of CBB on the effect of pocket
money, peer acceptance, and money retention on borrowing habit.
1.4. Significance of the Study
1. The result of this study is expected to help people having better
understanding about borrowing habit, either its direct of indirect
contributing factors which haven’t been examined by previous
studies.
2. The result of this study is also expected to help people control
unnecessary factors that influence the emergence of CBB and
borrowing habit.
5
INTRODUCTION
1.1.
Background of the Study
Economic theories basically claim that purchases are made to obtain
utility. In fact there are a lot of people making purchases to get satisfaction
from the purchasing process instead of obtaining utility. Dittmar (2005)
argued that these kind of people make purchases to improve their mood as
well as to increase their confidence, while DeSarbo & Edwards (1996) stated
that these people make purchases to escape from stress and anxiety. These
people are called compulsive buyers by O’Guinn dan Faber (1989). The
behavior shown by compulsive buyers in the study of consumer behavior is
called compulsive buying behavior (CBB). The process of buying is
considered as pleasurable action to compulsive buyers that they are often
labeled as the hedonists.
There are a lot of people who suffer from being compulsive buyers,
it is because CBB can lead to addictive shopping behavior and many other
negative consequences. A high tendency of CBB is found in India by Jalees
(2007) as well as in Thailand and China (Guo & Cai, 2011). This behavior is
often classified as a behavioral disorder that need to be prevented or removed
from them who are now suffering from their CBB.
1
The emergence of this behavior is caused by some internal factors,
supported by various external factors. Guo & Cai (2011) in their
investigation found that pocket money is a common factor that predict CBB
across nations, where people with higher pocket money are more likely to do
CBB. Another external determinant of CBB according to Moschis et al.
(2013) is the influence of peers. People who are not accepted by their peers
or having low peer acceptance are less likely to do CBB than those accepted
(high peer acceptance). In addition to both external factors explained above,
money retention is also proved as another determinant of CBB. People who
are not careful in using their money are more likely to do CBB (Li et al.,
2009).
Furthermore, while it is caused by some factors, according to Ergin
(2010) CBB can also cause some problems for the compulsive buyers
themselves, their family, friends, and their colleagues. One example of these
problems is that many compulsive buyers would have trouble with their debt.
In case of having one or more credit cards, Wilczaki (2006) found that many
compulsive buyers have been crippled by their debt. When compulsive
buyers don’t have credit card it is possible that the effect is on their
borrowing habit, because they probably will borrow money from their
parents and friends to make purchases. Borrowing habit can lead to other
negative effects, for example when compulsive buyers can not pay the
2
money they borrow from their friends for more than twice then it probably
will break their friendship.
It is also possible that borrowing habit itself can be affected by
pocket money, peer acceptance, and money retention. People with higher
pocket money may borrow money more often because they believe that they
have the ability to pay back, vice versa. In case of peer acceptance, people
who feel accepted by their peers will have greater chance to borrow money
from their peers. If it is linked to money retention, it isn’t hard to imagine
that people who are carefully using their money will rarely borrow money.
The reason is because they are good in managing their money to make it
enough for them or in case that they need a little extra money, they will try to
find another way to get it instead of borrowing.
Many studies have been conducted in the areas of CBB, especially
within the scope of marketing. Four of them are the study conducted by
Handan & Sun (2008) that examine the relationship between CBB with
online sales promotion and the study carried out by Jalees (2007); Shafii
(2008); & Man (2012) that explore the determinants of CBB. The studies
mentioned above simply analyze the determinants of CBB and investigate
the influence of some determinant factors of CBB, without further analysis
about the impact of CBB to borrowing habit.
3
At least there are two reasons for performing this study. The first
reason is that generally previous studies focus only in the field of marketing
by using marketing variables as the independent variables. Therefore there
are still limited studies carried out in the field of finance by framing CBB
using financial variables as the independent or dependent variables. The
second reason is previous studies only investigate the effect of several
independent variables on CBB, have unable to establish a connection
between CBB and its impacts.
1.2. Research Problems
1. Do pocket money, peer acceptance, and money retention have
significant effect on CBB?
2. Do pocket money, peer acceptance, and money retention have direct
significant effect on borrowing habit?
3. Does CBB mediate the effect of pocket money, peer acceptance,
and money retention on borrowing habit?
4
1.3. Purpose of the Study
1. To analyze the effect of pocket money, peer acceptance, and money
retention on CBB.
2. To analyze the direct effect of pocket money, peer acceptance, and
money retention on borrowing habit.
3. To analyze the mediating role of CBB on the effect of pocket
money, peer acceptance, and money retention on borrowing habit.
1.4. Significance of the Study
1. The result of this study is expected to help people having better
understanding about borrowing habit, either its direct of indirect
contributing factors which haven’t been examined by previous
studies.
2. The result of this study is also expected to help people control
unnecessary factors that influence the emergence of CBB and
borrowing habit.
5