Does family affect financial outcomes and psychological biases? Evidence from small investors in Bangladesh Mohammad Tariqul Islam Khan Faculty of Business, Multimedia University – Melaka Campus, Melaka, Malaysia, and Siow-Hooi Tan Faculty of Management, Multimedia University – Cyberjaya, Cyberjaya, Malaysia Abstract Purpose – The purpose this paper is to investigate whether family affects financial outcomes and psychological biases in an under-researched context, Bangladeshi small investors. Design/methodology/approach – To achieve the stated research objective, the survey data were collected from 223 small investors from brokerage houses in Dhaka and estimated using regression analysis. Findings – The results indicate that learning from parents, discussion with parents about financial issues and father’s education have the strongest impact on financial outcomes (i.e. financial wealth holding, portfolio value, investment strategy, technical indicator, past perceived and expected portfolio performance) and psychological biases (i.e. herding, risk tolerance and better-than-average). Furthermore, spouse’s education, parental income, marital status and family size explain financial outcomes and psychological biases, but to a lesser extent. Practical implications – The implications have been discussed for small investors and the family’s role in resulting positive financial outcomes and avoid biases. Originality/value – This is the first study to take into account a set of family background variables influencing various financial outcomes and psychological biases in the context of Bangladesh. Keywords Bangladesh, Family, Financial outcomes, Psychological biases, Small investors Paper type Research paper 1. Introduction Family is an integral part of an investment and may lead to healthy financial outcomes (Gudmunson and Danes, 2011). However, a lack of understanding of the family’s role may lead to less favorable outcomes (Vosylis and Erentaite, 2019; Fan and Chatterjee, 2019). A range of family-related variables such as family members, family’s material hardship, household income, parental education, parental teaching, marital status and spouse’s education have been suggested as essential components for an individual’s financial decisions (Xu et al., 2017; Zhu, 2019; Jorgensen and Savla, 2010; Shim et al., 2013; Webley and Nyhus, 2013; Hanewald and Kluge, 2014; Bertocchi et al., 2014). However, less research has focused on a set of family-related variables in an integrated way and the role that family may play in shaping investors’ financial outcomes and psychological biases. Family financial socialization theory suggests that individuals are socialized in how and when to spend and save, and prioritize spending and saving. Financial socialization in family takes place by day-to-day family interactions, relationships and implicit financial training (Shim et al., 2010). In family’s financial socialization, parental financial socialization is more effective for a family to implement their effects on financial behavior (Zhu, 2019; Tang, 2017). Rea (2019) extends the family’s financial socialization process by adding personal financial dispositions and financial well-being. Vosylis and Erentaite (2019) Journal of Family Business Management Vol. 10 No. 2, 2020 pp. 167-186 © Emerald Publishing Limited 2043-6238 DOI 10.1108/JFBM-05-2019-0036 Received 23 May 2019 Revised 30 August 2019 Accepted 3 October 2019 The current issue and full text archive of this journal is available on Emerald Insight at: www.emeraldinsight.com/2043-6238.htm JEL Classification — D14, D1, G11 167 Financial outcomes and psychological biases