From Financial Literacy to Investment Intention: The Sequential Roles of Risk Perception and Trust

The relationship between financial literacy and capital market participation remains a central focus of both theoretical and empirical research in behavioral finance. However, existing research has predominantly relied on direct-effect, mediation, or moderation frameworks, thereby offering only a partial understanding of how individuals make investment decisions under uncertainty. To address this limitation, this study develops a sequential cognitive–affective framework by integrating the Theory of Planned Behavior (TPB) and the Risk-as-Feelings Hypothesis (RFH). Within this framework, investment intention is conceptualized as the outcome of cognitive evaluations and affective responses, with financial literacy influencing these processes by shaping perceived risk and institutional trust. Utilizing a multistage sampling strategy, survey data were collected from 449 individual investors and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The results indicate that financial literacy is positively associated with investment intention, both directly and indirectly through a sequential mediation pathway. Specifically, higher financial literacy is associated with lower perceived risk, which subsequently strengthens trust in financial institutions and ultimately increases investment intention. These findings suggest that financial literacy functions not only as a cognitive resource but also as a psychological mechanism that influences how individuals interpret and respond to financial uncertainty. By validating a sequential cognition–affect pathway, this study provides a more comprehensive behavioral explanation for the inconsistent findings reported in prior research. The findings further suggest that financial literacy initiatives designed to address risk perceptions and institutional trust may be more effective in promoting capital market participation than programs focused solely on information provision.