Assessing the Impact of Financial Literacy on Firm Sustainability: Mediating Role of Financial Access and Firm Growth

Abstract

Even though firm sustainability is a long-standing concern, just a few studies on micro, small and medium enterprises (MSMEs) sustainability have been conducted. Many studies have concentrated on a few particular sustainability criteria, but there is no comprehensive study on the subject from which to make concrete conclusions. The present research was inspired by the idea to examine how resources such as financial literacy, financial access and company development influence the sustainability of MSMEs. Data was gathered from 438 owner-managers of micro, small and medium enterprises through a questionnaire. The research discovered that financial literacy, financial availability and company growth are positively correlated with firm sustainability when using partial least squares. Surprisingly, the research found that financial access and firm growth moderate the anticipated connection between financial literacy and sustainability. As a result, policymakers and practitioners should ensure that firms have better access to financial resources, that owner-managers have the necessary financial literacy and that micro, small and medium-sized businesses grow effectively better firm sustainability.

Defining and measuring financial literacy in the Indian context: a systematic literature review

“…, 2011), financial capability (Ramana and Muduli, 2018), financial risk attitude (Goswami et al. , 2017) and firm sustainability (Kaur and Bansal, 2020). Most articles were published after 2014.…”

“…All 36 studies considered for literature analysis are research articles published in the fields of management, business, finance, economics and banking by reputed journals. Twenty-eight out of the 36 studies directly measured FL, and the rest measured FL whilst studying closely related areas like investment decisions (Prasad et al, 2020), behavioural biases (Baker et al, 2018), the value of finance (Chauhan and Dey, 2020), financial well-being (Utkarsh et al, 2020), demand for financial services (Cole et al, 2011), financial capability (Ramana and Muduli, 2018), financial risk attitude (Goswami et al, 2017) and firm sustainability (Kaur and Bansal, 2020). Most articles were published after 2014.…”

Effect of Financial Literacy on the Growth of MSMEs

“…Also, there is a need to re-examine the residuals in the researches to see if there are misfits, even though overall models appear good. Kaur and Bansal (2021), examined how financial literacy, financial access and company development influence the sustainability and growth of MSMEs. They gathered data from 438 owner-managers of MSMEs via questionnaires.…”