The Influence Of Financial Literacy On Managerial Efficiency And Business Outcome

Article Sidebar

PDF
Published: 2025-10-18
DOI: https://doi.org/10.53555/jtar.v21i2.25
Keywords:
Financial Literacy, Managerial Efficiency, Business Outcome, SMEs, Structural Equation Modeling, Decision-Making Capability

Main Article Content

Dr. Surendar Gade
Dr. Gauri Modwel
Dr. Rajesh Kumar
Jivanjot Singh
Dr Priyanka Bhatt

Abstract

The current volatile economic environment needs more than just intuition and experience to navigate through successfully; a solid diet of financial literacy is needed to give strategic direction and provide enterprise sustenance. This paper examines the role of financial literacy in determining the effectiveness of management and consequently the business performance among the small and medium scale enterprises (SMEs). Financial literacy is proposed according to a resource-based theoretical framework as an adaptive skill, which enhances efficiency of decision-making and operations. Cross sectional survey design was used to obtain data of 379 SME owners and senior managers representing multi-industrial sector companies. The direct and mediated correlation of financial literacy, managerial efficiency, and business outcomes was evaluated through the Structural Equation Modeling (SEM) with the utilization of AMOS. The measurement model had good fit statistics (RMSEA = 0.045; CFI = 0.958; TLI = 0.944) and thus shows that the hypothesized structure is valid. The findings indicated that financial literacy boosted the efficiency of managers (b = 0.61, p < 0.001) that exerted a favorable impact on business performance (b = 0.53, p < 0.001). Whereas the direct relation, between financial literacy and performance, was also significant (p < 0.05, 0.27), the indirect effect, via efficacy at managerial performance, was stronger. These discoveries further validate financial literacy as a strategic capability needed to effectively practice as a manager and continuously achieve balance enterprise success goals. The study recommends the integration of formal and full financial education programs in SME development programs and the need of future follow-up and technologically oriented studies to enhance the existing knowledge of financial capability in dynamic business world.


 

Article Details

Issue

Vol. 21 No. 2 (2025): Journal of Theoretical Accounting Research

Section

Articles
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Author Biographies

Dr. Surendar Gade

Assistant Professor, School of Commerce, NMIMS Deemed to be University, Hyderabad, India Email: dr.g.surendar@gmail.com 

Dr. Gauri Modwel

New Delhi Institute of Management Professor, Email: gauri.modwel@ndimdelhi.org. Orcid ID: 0009-0001-8284-640X

Dr. Rajesh Kumar

Associate Professor, Management and Commerce Specialization – Finance, University Name - Teerthanker Mahaveer University, Email ID - rajeshdhiman.mba@gmail.com

Jivanjot Singh

Research Scholar, University Business School, Guru Nanak Dev University, Email Id: jivanjotsingh.ubs@gmail.com, ORCID ID - 0000 0003 3789 5795

Dr Priyanka Bhatt

Associate Professor, Gujarat Technological University (GTU), Ahmedabad, India bhattpriyanka273@gmail.com

How to Cite

The Influence Of Financial Literacy On Managerial Efficiency And Business Outcome. (2025). The Journal of Theoretical Accounting Research, 21(2), 45-52. https://doi.org/10.53555/jtar.v21i2.25

References

1. Alshebami, A. S., & Murad, M. (2022). The moderation effect of entrepreneurial resilience on the relationship between financial literacy and sustainable performance. Frontiers in Psychology, 13, 954841.

2. Bawono, I., Maulina, E., Rizal, M., & Purnomo, M. (2022). The role of knowledge management capability, financial literacy, and problem-solving skills on organizational performance for SMEs. Frontiers in Psychology, 13, 930742.

3. Beltran, B. (2024). Investigating the Relationship Between Employee Financial Literacy Education and Small Business Performance in the Southwest Region of Texas.

4. Beureukat, B., & Setyawati, I. (2023). The effect of financial literacy on msme financial management in Tanjungsari District, Sumedang Regency. Jurnal Ekonomi, 12(01), 684-689.

5. Bharathithasan, S., & Srinivasan, K. S. (2024). Profit and prosperity: the impact of financial literacy on small business growth. International Journal of Work Innovation, 5(3), 270-291.

6. Duréndez, A., Dieguez-Soto, J., & Madrid-Guijarro, A. (2023). The influence of CEO’s financial literacy on SMEs technological innovation: the mediating effects of MCS and risk-taking. Financial Innovation, 9(1), 15.

7. Ferawati, I. W., Fadah, I., & Paramu, H. (2024). Literature Review: Financial Literacy in The Context of Micro Enterprise Development and The Methods Used. Jurnal Pendidikan Akuntansi & Keuangan, 12(2), 189-202.

8. Haleem, A. T. H. A. M. B. A. W. A. (2022). Exploring the critical effect of financial literacy on sustainable business performance in the context of firm performance of SMEs in Sri Lanka. Research Explorer X (35), 56-88.

9. Heryanto, O. A., & Leng, P. (2021). Influence of financial literacy, managerial experience on financial management performance of SMES in surabaya. International Journal of Financial and Investment Studies (IJFIS), 2(2), 83-91.

10. Hidayat-ur-Rehman, I. (2024). The role of financial literacy in enhancing firm’s sustainable performance through Fintech adoption: a moderated mediation analysis. International Journal of Innovation Science.

11. Ishtiaq, M., Songling, Y., Hassan, A., & Hayat, A. (2020). The role of financial literacy in resource acquisition and financial performance; moderating role of government support. International Journal of Business and Economics Research, 9(1), 29.

12. Kartini, T., & Wijaya, J. H. (2023). The Effect of Financial Literacy on Financial Management of Msmes in the Pantura Area, Subang Regency. Jurnal Informatika Ekonomi Bisnis, 550-553.

13. Kulathunga, K. M. M. C. B., Ye, J., Sharma, S., & Weerathunga, P. R. (2020). How does technological and financial literacy influence SME performance: Mediating role of ERM practices. Information, 11(6), 297.

14. Kurniasari, F., Abd Hamid, N., & Lestari, E. D. (2025). Unraveling the impact of financial literacy, financial technology adoption, and access to finance on small medium enterprises business performance and sustainability: a serial mediation model. Cogent Business & Management, 12(1), 2487837.

15. Kyeyune, G. N., & Ntayi, J. M. (2025). Empowering rural communities: the role of financial literacy and management in sustainable development. Frontiers in Human Dynamics, 6, 1424126.

16. Napu, F., Syaifuddin, D. T., Wawo, A. B., & Zaid, S. (2025). Study of Financial Management Behavior Based on Financial Self-Efficacy and Financial Literacy in Small-Scale Agribusiness Development. Journal of Global Innovations in Agricultural Sciences, 319-331.

17. Orbaningsih, D., Pakaja, F., Handhajani, S. B. P., & Nursiswati, A. (2024). The influence of organizational climate and market orientation on business performance with financial literacy and csr as mediation in MSMES in Malang City. Revista De Gestão Social E Ambiental, 18(6), 1-16.

18. Owino, t. O. (2023). Moderating role of financial literacy on the relationship between cash management practices and financial performance of micro, small and medium enterprises in eldoret town, kenya (doctoral dissertation, university of eldoret).

19. Payne, Z. A. (2022). Financial Literacy and the Business Performance of Grenadian Small Business Owners: A Non-Experimental Correlational Study (Doctoral dissertation, Northcentral University).

20. Sajuyigbe, A. S., Oyedele, O., Oke, O. D., Sodeinde, G. M., Ayo-Oyebiyi, G. T., & Adeyemi, M. A. (2024). Financial Behavior and SMEs Performance: The Mediating Influence of Financial Literacy and Organizational Culture. Journal of Business and Technology, 8(2).

21. Siddik, A. B., Rahman, M. N., & Yong, L. (2023). Do fintech adoption and financial literacy improve corporate sustainability performance? The mediating role of access to finance. Journal of Cleaner Production, 421, 137658.

22. Sudewi, N. N. D., & Dewi, S. K. S. (2022). The Effect of Financial Literacy and Intellectual Capital on Financial Performance. International Journal of Business Management and Economic Review, 5(4), 240-251.

23. Tanko, U. M., Siyanbola, A. A., Bako, P. M., & Dotun, O. V. (2021). Capital structure and firm financial performance: Moderating effect of board financial literacy in Nigerian listed non-financial companies. Journal of Accounting Research, Organization and Economics, 4(1), 48-66.

24. Tian, G., Zhou, S., & Qi, Y. (2022). Executive financial literacy and corporate performance: evidence from small and medium‐sized enterprises in china. Asia‐Pacific Journal of Financial Studies, 51(6), 797-827.

25. Tóth, R., Zéman, Z., Túróczi, I., Kása, R., Popp, J., & Oláh, J. (2021). The system of relationships between sustainable corporate governance and corporate financial literacy. Polish Journal of Management Studies, 23.

26. Tuffour, J. K., Amoako, A. A., & Amartey, E. O. (2022). Assessing the effect of financial literacy among managers on the performance of small-scale enterprises. Global Business Review, 23(5), 1200-1217.

27. Wazdi, B. P., Yuliawati, A. K., Rofaida, R., & Sari, M. (2024). Financial literacy, job satisfaction, job performance and organizational performance: new evidence. Jhss (Journal of Humanities and Social Studies), 4(1), 069-074.

28. Yakob, S., Yakob, R., BAM, H. S., & Rusli, R. Z. A. (2021). Financial literacy and financial performance of small and medium-sized enterprises. The South East Asian Journal of Management, 15(1), 5.

29. Zaimovic, A., Omanovic, A., Dedovic, L., & Zaimovic, T. (2025). The effect of business experience on fintech behavioural adoption among MSME managers: the mediating role of digital financial literacy and its components. Future Business Journal, 11(1), 26.