The relationship between financial disputes and financial literacy

•The issues have rarely discussed in the past studies.•Higher financial literacy would be less likely to experience financial dispute.•Higher financial literacy will aggressively handle this problem.•Physiological characteristics are also key factors affecting the chance of financial dispute.•Our results are robustness to the potentially selection bias issue.

This study examines financial literacy and its relationship with financial disputes. We devised two special modules from the Third National Financial Literacy Survey conducted by Taiwan's Financial Supervisory Commission (FSC) in 2011. With this unique database, we examine topics that have rarely been discussed in other studies. Our empirical evidence suggests that people with a higher financial literacy are less likely to experience financial disputes. When the purchase of financial products and services leads to a financial dispute, people with a higher financial literacy will aggressively handle the problem. In addition, personal characteristics, such as gender, work status, and household income, are key factors affecting the chances of a financial dispute. Finally, our results are robust to potential selection bias when we include the results of the National Financial Literacy Survey conducted by the FSC in 2007, 2009, and 2011.