Abstract:
The study sought to understand how the status quo bias affects the financial decision making
behaviour of employees. A sample of 154 university employees were studied to find out how they
would choose investment opportunities for their pensions. Short questionnaires were emailed to
sampled employees and responses were expected within a week.The study was largely descriptive in
nature and it used the simple regression model to analyse the relationship between investment
decisions and employee attributes. The study was limited by the sampling technique used as not
all staff could be accessible during the covid 19 pandemic but the high response rate made
generalization of findings possible. It was found out that with small choice sets, individuals
may still prefer their known investments without rationally weighing the options. The
regression results show that most of the variables are not significant in explaining the
decisions to invest by employees showing lack of rationality. The results also showed that
most employees were not rational in their investment decisions as they did not weigh
retirement options that gave the greatest return but they opted to remain in the investment
that their employer had chosen for them previously. The results confirmed the existence of
status quo bias in investment decisions. The study confirms that apart from cost benefit
analysis individual decisions are influenced by cognitive biases. The study could also be
replicated on a larger scale in future.
