Adoption Intention of Financial Derivatives Using the Extended Valence Framework

Abstract

This study examines institutional investors’ intention to adopt financial derivatives by integrating valence-based factors, perceived benefit and perceived risk, while moderating the role of complexity. Data were collected from 142 directors across financial institutions in Tanzania and analysed using Partial Least Squares Structural Equation Modelling (PLS SEM) to assess direct and
moderating effects. The results reveal that both perceived benefit and perceived risk significantly and positively influence the adoption of financial derivatives.
Furthermore, complexity significantly moderates the relationships between perceived benefit, perceived risk, and adoption intention, weakening their positive effects under high complexity. This study enhances the financial innovation valence model by introducing complexity and empirically validating the extended framework for financial innovations. This study gives knowledge to
regulators to recognise how financial institutions perceive the benefits of financial derivatives, so that the infrastructure necessary for their development can be built. Moreover, it fills the empirical gap in the literature on the adoption intention of financial derivatives. This study contributes by integrating valence theory with complexity theory, introducing complexity as a moderator. Applying valence to this unique type of innovation yielded an unexpected result that challenges traditional valence theory. Thus, this study provides a comprehensive understanding of financial derivative adoption intentions in Tanzania, a crucial context for an emerging market.

Keywords: Perceived Risks, Perceived Benefit, Valence, Complexity, Adoption Intention; Tanzania, Emerging Markets.