The Role of Financial Literacy in Resource Acquisition and Financial Performance; Moderating Role of Government Support
Adequate resources are considered as success factors for high level of competitiveness and long term survival. However, SMEs have not enough resources which hinder their operational activities and profitability. Acquiring valuable resources has become a challenging question for owners and managers of SMEs. This research is an attempt to examine either the direct influence of financial literacy on financial performance or resource acquisition plays a mediating role. Additionally, this research tests the moderating role of government support between financial literacy and resource acquisition. To test the model, data were collected through a structured questionnaire from the emerging market of Pakistani small and medium size enterprises (SMEs) market. Hypotheses are tested through structural equation modeling (SEM) using Analysis of a Moment Structures (AMOS). The results indicate that financial literacy significantly influences resource acquisition and financial performance. Resource acquisition plays a partial mediating role between financial literacy and resource acquisition. This research recommends SMEs to gainfully employed financially educated managers for batter used and to acquire expedient resources. Moreover, this research suggests the government and controlling authority of SMEs support the firms as in accessing valuable resources that can help in high profitability. In turn, these SMEs can contribute to the development of the economy in different aspect. Further implications are discussed.
The Role of Financial Literacy in Resource Acquisition and Financial Performance; Moderating Role of Government Support, International Journal of Business and Economics Research.
Vol. 9, No. 1,
2020, pp. 29-39.
Yang. Y, Chen. X, Gu. J, and Fujita, H. (2019). “Alleviating Financing Constraints of SMEs through Supply Chain” Sustainability, 11 (3), 673.
Cai. L, Hughes. M, and Yin. M, (2014). “The relationship between resource acquisition methods and firm performance in Chinese new ventures: The intermediate effect of learning capability” Journal of Small Business Management, 52 (3), 365-389.
Chen. F. W, Lin, M. X, and Wang. T, (2018). “Sustainable Resource Acquisition Path: A Dynamic Model of Embedded Entrepreneurial Network Governance under Uncertainty” Sustainability, 10 (11), 4061.
Anwar. M, Rehman. A. U, & Shah. S. Z. A, (2018) “Networking and new venture’s performance: Mediating role of competitive advantage” International Journal of Emerging Markets, 13 (5), 998-1025.
Ying. Q, Hassan. H, and Ahmad. H, (2019) “The Role of a Manager’s Intangible Capabilities in Resource Acquisition and Sustainable Competitive Performance” Sustainability, 11 (2), 527.
Anwar. M, and A. Shah, S. Z, (2018) “Managerial Networking and Business Model Innovation: Empirical Study of New Ventures in an Emerging Economy” Journal of Small Business & Entrepreneurship, 1-22.
Jiang. X, Liu. H, Fey. C, and Jiang. F, (2018). “Entrepreneurial orientation, network resource acquisition, and firm performance: A network approach” Journal of Business Research, 87, 46-57.
Ko. E. J, and McKelvie. A, (2018). “Signaling for more money: The roles of founders' human capital and investor prominence in resource acquisition across different stages of firm development” Journal of Business Venturing, 33 (4), 438-454.
Songling. Y, Ishtiaq. M, Anwar. M, and Ahmed, H. (2018). “The role of government support in sustainable competitive position and firm performance” Sustainability, 10 (10), 3495.
Barney. J, (1991). “Firm resources and sustained competitive advantage” Journal of management, 17 (1), 99-120.
Anwar. M, Khan. S. Z, and Khan. N. U, (2018). “Intellectual capital, entrepreneurial strategy and new ventures performance: Mediating role of competitive advantage” Business and Economic Review, 10 (1), 63-93.
Yang. S, Ishtiaq. M, and Anwar. M, (2018). “Enterprise Risk Management Practices and Firm Performance, the Mediating Role of Competitive Advantage and the Moderating Role of Financial Literacy”. Journal of Risk and Financial Management, 11 (3), 35.
Anwar. M, Shah. S. Z. A, and Khan. S. Z, (2018). “The role of personality in SMEs internationalization: Empirical evidence” Review of International Business and Strategy, 28 (2), 258-282.
Miller. M, Reichelstein. J, Salas. C, and Zia, B. (2015). “Can you help someone become financially capable? A meta-analysis of the literature” World Bank Research Observer, 30 (2), 220–246.
Siekei. J, Wagoki. J, and Kalio. A, (2013). “An assessment of the role of financial literacy on performance of small and micro enterprises: Case of Equity Group Foundation training program on SMEs in Njoro District, Kenya” Business & Applied Sciences, 1 (7), 250.
V. Gaudecker, H.-M. (2015). “How does household portfolio diversification vary with financial literacy and financial advice”? The Journal of Finance, 70 (2), 489–507.
Korniotis. G. M, and Kumar. A, (2013). “Do portfolio distortions reflect superior information or psychological biases”? Journal of Financial and Quantitative Analysis, 48 (01), 1–45.
Adomako. S, Danso. A, and Ofori. D. J, (2016). “The moderating influence of financial literacy on the relationship between access to finance and firm growth in Ghana”. Venture Capital, 18 (1), 43-61.
Chu. Z, Wang. Z, Xiao. J. J, and Zhang. W. (2017). “Financial literacy, portfolio choice and financial well-being”. Social Indicators Research, 132 (2), 799-820.
Lusardi. A, and Mitchell, O. S. (2014). “The economic importance of financial literacy: Theory and evidence”. Journal of Economic Literature, 52 (1), 5–44.
Rooij. V, Maarten. C. J, Lusardi. A, and Alessie, R. J. M. (2012). “Financial literacy, retirement planning and household wealth”. Economic Journal, 122 (560), 449–478.
Drexler. A, Fisher. G, and Schoar, A. (2014). “Keeping it simple: Financial literacy and rules of thumb”. American Economic Journal: Applied Economics, 6 (2), 1–31.
Berry. J, Karlan. D, and Pradhan. M, (2018). “The impact of financial education for youth in Ghana”. World Development, 102, 71-89.
Kaiser. T, and Menkhoff. L. (2017). “Does financial education impact financial literacy and financial behavior and if so, when”? World Bank Economic Review, 31 (3), 611–630.
Grohmann. A, Klühs. T, amd Menkhoff. L, (2018). “Does financial literacy improve financial inclusion? Cross country evidence”. World Development, 111, 84-96.
Hussain. J, Salia. S, and Karim. A, (2018). “Is knowledge that powerful? Financial literacy and access to finance: An analysis of enterprises in the UK”. Journal of Small Business and Enterprise Development, 25 (6), 985-1003.
Foley. J, (2018). “We really need to talk about owner-managers and financial awareness”. Small Enterprise Research, 25 (1), 90-98.
Cole. S, Paulson. A, and Shastry. G. K, (2014). “Smart money? The effect of education on financial outcomes”. The Review of Financial Studies, 27 (7), 2022-2051.
Fernandes. D, Lynch Jr. J. G, and Netemeyer, R. G, (2014). “Financial literacy, financial education, and downstream financial behaviors”. Management Science, 60 (8), 1861-1883.
Badolato. P. G, Donelson. D. C, and Ege. M, (2014). “Audit committee financial expertise and earnings management: The role of status”. Journal of Accounting and Economics, 58 (2-3), 208-230.
Shen. C. H, Lin. S. J, Tang. D. P, and Hsiao, Y. J. (2016). “The relationship between financial disputes and financial literacy”. Pacific-Basin Finance Journal, 36, 46-65.
Hetling. A, Postmus. J. L, and Kaltz. C. (2016). “A randomized controlled trial of a financial literacy curriculum for survivors of intimate partner violence”. Journal of Family and Economic Issues, 37 (4), 672-685.
Shahbaz. M, Naeem. M, Ahad. M, and Tahir, I. (2018). “Is natural resource abundance a stimulus for financial development in the USA”?. Resources Policy, 55, 223-232.
Zhang. Y. (2017). “Consumption responses to pay frequency: Evidence from “extra” paychecks”. ACR North American Advances.
Barney. J. B, and Arikan. A. M. (2001). “The resource-based view: Origins and implications”. Handbook of strategic management, 124188.
Shane. S, (2003). “A General Theory of Entrepreneurship: The Individual-Opportunity Nexus. Northampton, MA: Edward Elgar”.
Carnes. C. M, Chirico. F, Hitt, M. A, Huh, D. W, and Pisano, V. (2017). “Resource orchestration for innovation: Structuring and bundling resources in growth-and maturity-stage firms”. Long range planning, 50 (4), 472-486.
Kim. J, Steensma. K, and Park. H. (2017). “The influence of technological links, social ties, and incumbent firm opportunistic propensity on the formation of corporate venture capital deals”. Journal of Management.
Khan. S. Z, Yang. Q, and Waheed. A. (2018). “Investment in intangible resources and capabilities spurs sustainable competitive advantage and firm performance”. Corporate Social Responsibility and Environmental Management.
Carpena. F, Cole. S, Shapiro. J, and Zia. B. (2017). “The ABCs of financial education: experimental evidence on attitudes, behavior, and cognitive biases. Management Science”.
Zhao. E. Y, Fisher. G, Lounsbury. M, and Miller. D. (2017). “Optimal distinctiveness: Broadening the interface between institutional theory and strategic management”. Strategic Management Journal, 38 (1), 93-113.
Kianto. A, Ritala. P, Spender. J. C, and Vanhala. M. (2014). “The interaction of intellectual capital assets and knowledge management practices in organizational value creation”. Journal of Intellectual capital, 15 (3), 362-375.
Song. Z. F. (2018). “The Relationship among Top Managerial Social Capital, Resource Acquisition and the Growth Performance of Small and Medium-sized Travel Agencies”. In Proceedings of the 2018 International Conference on Internet and e-Business (pp. 218-222). ACM.
Xiao. J. J, and Porto. N, (2017). “Financial education and financial satisfaction: Financial literacy, behavior, and capability as mediators”. International Journal of Bank Marketing, 35 (5), 805-817.
Lavee. D, and Joseph-Ezra. H. (2015). “The Development and use of Economic Instruments in Environmental Policy: The Case of Israel”. Journal of Environmental Assessment Policy and Management, 17 (02), 1550018.
Lee. E, Jung. C. S, and Hwang. M. S. (2016). “Investigating supportive conditions for participation in voluntary environmental programs”. Journal of environmental planning and management, 59 (7), 1323-1340.
Wei. J, and Liu. Y. (2015). “Government support and firm innovation performance: empirical analysis of 343 innovative enterprises in China”. Chinese Management Studies, 9 (1), 38-55.
Wilson. R, (2007). “Making development assistance sustainable through Islamic microfinance”. International Journal of Economics, Management and Accounting, 15 (2).
Clement. K, and Hansen. M, (2003). “Financial incentives to improve environmental performance: a review of Nordic public sector support for SMEs”. European Environment, 13 (1), 34-47.
Joo. H. Y, and Suh. H. (2017). “The Effects of Government Support on Corporate Performance Hedging against International Environmental Regulation”. Sustainability, 9 (11), 1980.
Anwar. M, Khan. S. Z, and Rehman. A. U, (2017). “Financial Literacy, Behavioral Biases and Investor’s Portfolio Diversification: Empirical Study of an Emerging Stock Market”. Journal of Finance and Economics Research, 2 (2), 144-163.
Anwar, M. (2018). Business model innovation and SMEs performance—does competitive advantage mediate? International Journal of Innovation Management, 22 (07), 1850057.
George. D, (2011). “SPSS for windows step by step: A simple study guide and reference” 17.0 update, 10/e. Pearson Education India.
Podsakoff. P. M, and Organ. D. W. (1986). “Self-reports in organizational research: problems and prospects”. Journal of Management, 12, 531–44.
Hair. J. F, Anderson. R. E, Babin. B. J, and Black. W. C. (2010). “Multivariate data analysis: A global perspective” (Vol. 7). Upper Saddle River, NJ: Pearson.
Hu. L. T, Bentler. P. M, (1999) “Cutoff criteria for fit indexes in covariance structure analysis: Conventional criteria versus new alternatives”. Structural Equation Modeling 6 (1), 1-55.
Nunnally. J. C, and Bernstein. I, (1994). “Psychometric theory 3rd ed. 1994 McGraw-Hill. New York, NY”.
Argiles. J. M, and Slof. E. J, (2003). “The use of financial accounting information and firm performance: an empirical quantification for farms”. Accounting and Business Research, 33 (4), 251-273.
Gooderham. P. N, Tobiassen. A, Døving. E, and Nordhaug. O. (2004). “Accountants as sources of business advice for small firms”. International small business journal, 22 (1), 5-22.