In recent decades, the world economy has witnessed a persistent increase in individuals' levels of indebtedness, making debt a persistent feature of household balance sheets at all stages of life (Leandro & Botelho, 2022). As it is an important aspect in many countries and, in extreme situations, constitutes a threat not only to the financial stability of families, but also a precursor to economic and financial crises, understanding issues related to indebtedness is a relevant aspect for companies, the economy, governments and society (Gutiérrez-Nieto et al., 2017; Almenberg et al., 2021; Šubová et al., 2021).
Indebtedness is the process in which individuals commit a significant portion of their income in order to honor it in the future and which, in more extreme situations (excessive indebtedness), can generate a situation in which the individual becomes unable to pay their debts with the income they receive, characterizing over-indebtedness (Pacheco et al., 2018).
An interesting feature about indebtedness emerges from this concept: there is a significant difference between the accounting concept of indebtedness and its cognitive (mental) recognition. From an accounting point of view, indebtedness consists of assuming obligations (debts) in the present which are expected to be paid off in the future. On the other hand, there are cognitive aspects that assume that the individual will only recognize debt when there is difficulty in honouring the obligation. At this point, indebtedness is influenced by the level of coupling between consumption and payment and by the psychological ownership of borrowed money (Prelec & Loewenstein, 1998; Sharma et al., 2021).
Finance has always played a critical role in economies, as it is at the center of consumption, savings and investment decisions by individuals, companies and governments (Claus & Krippner, 2018). In this context, the scientific literature has been trying over the years to understand what leads individuals into debt and how to mitigate it using traditional economic approaches (Zerrenner, 2007; Keese, 2012), and to understand how behavioral economics, whose approach combines psychological, cognitive and behavioral foundations with economic factors (Costa et al., 2019) influences the individual's behavior when taking on and managing debt (Flores & Vieira, 2014; Swacha-Lech & Solarz, 2019; Sharma et al., 2021).
Since individual over-indebtedness is an interdisciplinary, complex and multifaceted phenomenon, where no single set of characteristics is sufficient to explain it worldwide (Blázquez et al., 2020; Leandro & Botelho, 2022), and behavioral finance serves as a complement to classical finance, introducing behavioral aspects into decision-making (Aguirre & Aguirre, 2024), studies that analyze the determinants of personal indebtedness from the perspective of the behavioral sciences (economics and behavioral finance) bring valuable insights and expand the literature, with a strong contribution to the field of public policy.
In view of the above, this research aims to investigate the intellectual structure of publications on the influence of behavioral biases on the level of personal indebtedness, in order to expand knowledge on the subject. As a result, we hope to answer the following questions: (i) which are the main works and authors with significant contributions to this area of knowledge?; (ii) how are the studies concentrated (clusters)?; (iii) how has indebtedness been discussed from a behavioral perspective?; (iv) what are the main cognitive biases associated with indebtedness? and; (v) what are the trends and research gaps in this field of knowledge?
This is a descriptive study, using a structured and systematized bibliometric approach using the "Proknow-C" tool, which tends to minimize the use of randomness and subjectivity in the literature review process (Afonso et al., 2011). The relevance of this study is based on the fact that (i) it investigates a problem (indebtedness) that directly affects people's lives; (ii) the importance of studies that examine the factors that influence the increase in indebtedness (Gathergood, 2012); (iii) the growing increase in levels of indebtedness seen in Brazil and worldwide (Leandro & Botelho, 2022) and; (iv) for exploring the contribution of behavioral economics and finance in this field of knowledge.
Theoretical Background
Debt can be understood as an amount of money lent between parties, with the condition that the amount lent by the creditor is later repaid by the debtor. It is a financial device commonly used when current savings or income are inadequate for desirable purchases or for urgent payments and survival (Hiilamo, 2020).
Debt can be conceptualized in various ways. Under an economic lens, it is shown as an instrument whose purpose is to balance consumption over time, which under certain assumptions, has a positive effect on one's "well-being" (Zinman, 2015). Under a sociological lens, it can be understood as an unbalanced and distinct social arrangement between a creditor and a debtor, characterized by an obligation to repay in the future (Hiilamo, 2020).
Debt is a planned and rational decision that allows for the intertemporal redistribution of consumption (Gutiérrez-Nieto et al., 2017). It refers to the financial situation resulting from the act of taking on or contracting debts, i.e. it is the sum of the amount of money that a person or company owes to third parties (accumulated debts). It differs from the concept of debt in that, while debt, from a financial point of view, represents a specific monetary value that a person has to pay someone for an obligation; indebtedness is a broader measure of the total debts that an entity has in relation to some financial parameter, such as revenue or equity (Betti et al., 2007; Leandro & Botelho, 2022). Thus, according to the ratio (debt/revenue or debt/equity, for example), the degree of indebtedness of an entity (company or individual) can be considered low, medium or high.
On another point, excessive indebtedness can result in default, which occurs when indebted individuals are unable to pay their debts on time. The continuous increase in indebtedness has an impact on individuals' ability to pay and, at its most advanced stage, can result in them being unable to pay their current credit repayments and other commitments without reducing their spending below the normal minimum levels, a situation which characterizes over-indebtedness (Brennan & Gallagher, 2007). Overall, people are considered over-indebted if they are having difficulties meeting (or are falling behind with) their household commitments, whether these relate to servicing secured or unsecured borrowing, or to payments of rent, utility or other household bills (Blázquez et al., 2020).
According to Katona (1975) there are three reasons why individuals spend more than they earn: (i) low income, so they can't even cover essential expenses; (ii) high income, combined with a strong desire to spend; and (iii) a lack of desire to save (regardless of income). This illustrates that the "spending function" goes far beyond subjective expected utility, but is influenced by other factors, especially behavioral ones. In this context, it can be seen that behavioral economics can be useful both for identifying the causes of excessive indebtedness and for dealing with it (Daura, 2018).
Previous studies evaluating the determinants of personal indebtedness have shown that the pain of paying plays an important role in consumer self-regulation (Prelec & Loewenstein, 1998); that individuals with present bias are more likely to have credit card debt (Meier & Sprenger, 2010); that successful money management reduces the willpower needed to control financial behavior and helps prevent and combat over-indebtedness (Kamleitner et al., 2011), 2011); that individuals' impulsiveness when making decisions has a significant influence on indebtedness (Ottaviani & Vandone, 2011); that a lack of self-control and financial illiteracy are positively associated with excessive indebtedness (Gathergood, 2012); that there is a significant difference in the level of indebtedness according to age, gender, marital status, education, religion, religious principles, occupation, household income, credit card and credit addiction (Flores & Vieira, 2014); that impulsivity fully mediates the impact of financial literacy on debt (Ottaviani & Vandone, 2018); that overconfidence has been associated with a series of negative financial behaviors and outcomes (Atlas et al., 2019); and that people who are overconfident in their financial abilities tend to borrow more than less confident individuals (Hauff & Nilsson, 2020).
In the field of the psychology of money, Webley & Nyhus (2001) show that while economic variables alone predict debt very well, psychological factors (especially current orientation, self-control and attitudes towards debt) improve the ability to predict debt. Hershfield et al. (2015) examined three psychological barriers to the responsible use of credit and debt and pointed to the tendency for consumers to categorize debt and savings in separate mental accounts. Corroboratively, Sussman & O'Brien (2016) also point out people's tendency to preserve savings by borrowing from a credit option with a high interest rate. In this context, Swacha-Lech & Solarz (2019) indicate that the strongest determinants of mental accounting attitude are: having debt, having savings, debt aversion and the amount of monthly net income achieved. Sharma et al. (2021) introduce the concept of psychological ownership of borrowed money, which represents the extent to which consumers feel that borrowed money is theirs, and report that framing debt using language with lower psychological ownership can reduce consumers' propensity to borrow. These papers illustrate how the psychology of money and mental accounting can influence the propensity for and maintenance of personal indebtedness.
With regard to systematic literature reviews, the results of Leandro & Botelho (2022) point out that (i) over-indebtedness is an interdisciplinary, complex and multifaceted phenomenon; (ii) the antecedents of over-indebtedness can be related to the consumer, creditors or the macro-environment; and (iii) over-indebtedness is multi-causal and the associated problems rarely manifest themselves in isolation. Finally, they propose directions for future research through questions aimed at analyzing topics that interrelate indebtedness with (i) antecedents, (ii) results, (iii) theoretical foundations, (iv) methods, (v) personal bankruptcy, (vi) regulation and (vii) prevention and mitigation.