Artificial Intelligence in Financial Decision-Making: Unveiling the Mediating Role of Financial Literacy and the Moderating Influence of Risk Perception on Investment Outcomes

Abstract

This study investigated the role of Artificial Intelligence (AI) in financial decision-making, emphasizing the mediating effect of financial literacy and the moderating influence of risk perception on investment outcomes. The research aimed to understand how investors’ knowledge and psychological factors interacted with AI-driven decision tools to shape financial performance. Using a quantitative approach, data were collected from 350 individual investors through structured questionnaires and analyzed using Structural Equation Modeling (SEM). The findings revealed that AI adoption significantly improved investment outcomes, but this relationship was strongly mediated by financial literacy, indicating that investors with higher financial knowledge utilized AI tools more effectively. Furthermore, risk perception was found to moderate the relationship between financial literacy and investment outcomes, suggesting that individuals with higher risk aversion benefited less from AI-driven financial insights. The results underscored that AI tools alone cannot ensure optimal investment success without adequate literacy and balanced risk perception. This study contributed to the growing body of behavioral finance and fintech literature by integrating cognitive and psychological dimensions within AI-based financial decision-making models. It also provided practical recommendations for policymakers and financial institutions to design AI-enhanced literacy programs and promote responsible adoption of financial technologies.

Keywords:

Artificial Intelligence, Financial Decision-Making, Financial Literacy, Investment Outcomes, Risk Perception, Technology Adoption