Trichotomy of Needs Theory in Stock Market Investment Decision: Evidence from Sri Lanka


  • N. P. K. Ekanayake Department of Commerce and Financial Management, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka
  • P.A.N.S. Anuradha Department of Finance, Faculty of Management Studies and Commerce, University of Sri Jayewardenepura, Sri Lanka



In the discipline of finance, many authors and researchers have claimed that conventional finance is the central point of the finance research arena. However, disciplines such as psychology and sociology found to be crucial in the stock market investment decision. Therefore, this study mainly focuses on the impact of psychological attributes in the stock market investment decision. In order to address the psychological aspect of an individual investor, the authors suggest applying the well-established Trichotomy of Needs Theory by David McClelland. This theory states that every person has one of the three main driving characteristics: the need for power, the need for affiliation, or the need for achievement which ultimately results in behavioural variations. In literature, there is evidence that the Needs Theory impacts managerial decision-making. This study has adopted a quantitative research approach and thus, a modified research questionnaire was applied to a sample of 386 individual stock market investors who have currently invested in the Colombo Stock Exchange. The sample was selected using the systematic random sampling technique. To test the hypothesised relationships between the constructs, a Structural Equation Modelling was performed. Results show that there is a significant positive impact on stock market investment decisions from both the need for affiliation and the need for achievement. It is expected that the model leads to the novel finding that personal characteristics of individual investors explained by their needs lead to variations in their stock market investment decisions, paving the way for behavioural finance forecasting to take such constructs into consideration in order to increase the accuracy of behavioural financing models.

Keywords: Needs Theory, Investment Decision, Need for Power, Need for Affiliation, Need for Achievement