The Relationship Between Electronic Word-of-Mouth Information, Information Adoption, and Investment Decisions of Vietnamese Stock Investors
Authors: Hoang Vu Minh , Nguyen Tuan Doan Anh , Xuan Dinh Anh , Minh Trinh Hanh , Phi Tran Long 
Published: August 2024

Aim/Purpose: This study investigates the relationship between Electronic Word-of-Mouth (EWOM), Information Adoption, and the stock investment of Vietnamese investors.

Background: Misinformation spreads online, and a lack of strong information analysis skills can lead Vietnamese investors to make poor stock choices. By understanding how online conversations and information processing influence investment decisions, this research can help investors avoid these pitfalls.

Methodology: This study applies Structural Equation Modelling (SEM) to investigate how non-professional investors react to online information and which information factors influence their investment decisions. The final sample includes 512 investors from 18 to 65 years old from various professional backgrounds (including finance, technology, education, etc.). We conducted a combined online and offline survey using a convenience sampling method from August to November 2023.

Contribution: This study contributes to the growing literature on Electronic Word-of-Mouth (EWOM) and its impact on investment decisions. While prior research has explored EWOM in various contexts, we focus on Vietnamese investors, which can offer valuable insights into its role within a developing nation’s stock market. Investors, particularly those who are new or less experienced, are often susceptible to the influence of EWOM. By examining EWOM’s influence in Vietnam, this study sheds light on a crucial factor impacting investment behavior in this emerging market.

Findings: The results show that EWOM has a moderate impact on the Information Adoption and investment decisions of Vietnamese stock investors. Information Quality (QL) is the factor that has the strongest impact on Information Adoption (IA), followed by Information Credibility (IC) and Attitude Towards Information (AT). Needs for Information (NI) only have a small impact on Information Adoption (IA). Finally, Information Adoption (IA) has a limited influence on investor decisions in stock investment. We also find that investors need to verify information through official sites before making investment decisions based on posts in social media groups.

Recommendations for Practitioners: The findings suggest that state management and media agencies need to coordinate to improve the quality of EWOM information to protect investors and promote the healthy development of the stock market. Social media platform managers need to moderate content, remove false information, prioritize displaying authentic information, cooperate with experts, provide complete information, and personalize the experience to enhance investor trust and positive attitude. Securities companies need to provide complete, accurate, and updated information about the market and investment products. They can enhance investor trust and positive attitude by developing news channels, interacting with investors, and providing auxiliary services. Listed companies need to take the initiative to improve the quality of information disclosure and ensure clarity, comprehensibility, and regular updates. Use diverse communication channels and improve corporate governance capacity to increase investor trust and positive attitude. Investors need to seek information from reliable sources, compare information from multiple sources, and carefully check the source and author of the information. They should improve their investment knowledge and skills, consult experts, define investment goals, and build a suitable investment portfolio.

Recommendation for Researchers: This study synthesized previous research on EWOM, but there is still a gap in the field of securities because each nation has its laws, regulations, and policies. The relationships between the factors in the model are not yet clear, and there is a need to develop a model with more interactive factors. The research results need to be further verified, and more research can be conducted on the influence of investor psychology, investment experience, etc.

Impact on Society: This study finds that online word-of-mouth (EWOM) can influence Vietnamese investors’ stock decisions, but information quality is more important. Policymakers should regulate EWOM accuracy, fund managers should use social media to reach investors, and investors should diversify their information sources.

Future Research: This study focuses solely on the stock market, while individual investors in Vietnam may engage in various other investment forms such as gold, real estate, or cryptocurrencies. Therefore, future research could expand the scope to include other investment types to gain a more comprehensive understanding of how individual investors in Vietnam utilize electronic word-of-mouth (EWOM) and adopt information in their investment decision-making process. Furthermore, while these findings may apply to other emerging markets with similar levels of financial literacy as Vietnam, they may not fully extend to countries with higher financial literacy rates. Hence, further studies could be conducted in developed countries to examine the generalizability of these findings. Finally, future research could see how EWOM’s impact changes over a longer period. Additionally, a more nuanced understanding of the information adoption process could be achieved by developing a research model with additional factors.