International Journal of Research and Innovation in Social Science (IJRISS) | Volume III, Issue X, October 2019 | ISSN 2454–6186

The Impact of Financial Literacy on Business Performance

Khadijah Muhammad Usama, Wan Fauziah Wan Yusoff

Faculty of Technology Management and Business, Universiti Tun Hussein Onn, Malaysia

Abstract: – The purpose of this study was to investigate the influence of financial literacy financial on business performance of entrepreneurs in Bauchi metropolis Nigeria. The study was clasped on a resource-based theory which postulates that given resource heterogeneity immovability and contentment of the requirement of value rareness, flawed imitability and non-substitutability, a firm’s resource can be a source of sustained competitive advantage. The study revealed that financial literacy had a statistical influence on the performance of entrepreneurs. The paper advances the argument and general view that financial literacy is a major contributing factor in entrepreneurial business performance.

Keywords: Financial Literacy, Business Performance.

I. INTRODUCTION

Entrepreneurs operate in dynamic environments, and as financial markets become more competitive and financial portfolios more complex, entrepreneurs become vulnerable to information asymmetries if the complexity in financial markets is not matched by a commensurate growth in entrepreneurial financial literacy (Barte, 2012). At the macroeconomic level, small businesses are the backbone of many economies, and when the financial literacy skills among entrepreneurs are not sufficient to operate successful enterprises, the whole economy is at risk(Dahmen & Rodríguez, 2014). Studies suggest that there is a direct relationship between entrepreneurial financial literacy and the business performance of entrepreneurs (Barte, 2012). Other studies indicate indirect relationships where financial literacy influences the performance of entrepreneurs through its interaction with other factors such as financial inclusion and financial awareness. Studies also suggest that entrepreneurial financial literacy enhances access to utilisation of financial services which facilitates enterprises to invent and exploit growth opportunities (Nunoo & Andoh, 2011). Entrepreneurial financial literacy effects financial inclusion by a business enterprise in the process of finding and using financial services(Hieltjes & Petrova, 2013). Scholars and Policymakers have acknowledged that financial literacy is an entrepreneurial competency which enables business enterprises to survive in a progressively unstable environment (Hazlina Ahmad et al., 2010). This study is clasped on resource-based theory.