Cognitive Ability And Household Debt Behavior Of Chinese

At present,the leverage level of China’s household sector is generally controllable,but the rapidly rising household debt scale and leverage ratio still arouse the attention of all sectors of society,indicating that China still needs to be vigilant about the scale of household debt and excessive leverage.In fact,moderate borrowing can help families improve their quality of life and improve family happiness;but once the debt level exceeds the family’s ability to bear,it will not only increase the family’s financial pressure,but also be detrimental to the improvement of family happiness.At the same time,once there are more overindebted households in the macroeconomy,it will even impact the stability of the macroeconomy.Therefore,it is crucial to regulate the debt behavior of households.Cognitive ability is an important and more essential factor affecting household debt behavior.In-depth discussion of how cognitive ability affects household debt decision-making is of great practical significance for preventing financial risks brought by the household sector.This paper firstly sorts out the relevant literature related to cognitive ability and family debt behavior,and clarifies how cognitive ability affects family debt behavior and how cognitive ability affects family debt behavior.Secondly,based on the data of 2014 and 2018 in the China Family Tracking Survey(CFPS),this paper forms household-level data through a series of collation and compilation.The data is used to empirically test how the cognitive level of financial decision makers affects the behavior of household debt through Probit,Tobit and other methods,and on this basis,the corresponding endogeneity test,robustness test and mechanism test are conducted.The research results show that,first of all,cognitive ability is different from the two major factors of financial knowledge and education.The improvement of cognitive level actually inhibits the holding probability and holding amount of household debt.Second,households with higher cognitive levels have higher preference for formal borrowing,and are less likely to borrow from informal borrowing channels when they actually borrow.Third,the improvement of cognition level promotes the possibility of moderate borrowing of households and reduces the probability of excessive debt behavior of households.Fourth,households with high cognitive ability have lower debt leverage and higher per capita residual income after debt repayment.Fifth,there are heterogeneous differences in the influence of different dimensions of cognitive ability on various household debt behaviors,and the role of word ability in influencing household debt decision-making is more obvious.Further research found that cognitive ability can affect household debt behavior through six major channels: information effect,risk preference effect,time preference effect,risk perception effect,income effect,and risk management effect.The specific performance is that cognitive ability can affect the family’s health by improving personal information acquisition and information processing capabilities,reducing personal risk tolerance,improving personal patience,reducing personal overconfidence,increasing family income,and improving family risk management capabilities.debt behavior.Based on the research conclusions of this paper and the current status of cognitive ability and debt status of the household sector in China,this paper puts forward some suggestions to better regulate the debt behavior of the household sector and better prevent the financial risk brought by the household sector.