The influence of financial literacy and the quality of financial reports on MSME performance
DOI:
https://doi.org/10.35335/ijafibs.v14i2.531Keywords:
Financial Literacy, MSME performance, Quality of Financial ReportsAbstract
Previous studies have reported inconsistent findings regarding the relationship between financial literacy, financial reporting quality, and MSME performance. While several studies have found that financial literacy and financial reporting quality positively influence MSME performance, other studies have reported insignificant effects, indicating the need for further empirical examination. This study aims to examine the influence of financial literacy and financial reporting quality on MSME performance in Surabaya by considering both variables simultaneously as complementary dimensions of MSME financial capability. A quantitative approach was employed using questionnaire data collected from MSME owners in Surabaya. A total of 400 questionnaires were distributed, of which 384 complete and usable responses were obtained, resulting in a final analytical sample of 384 respondents. The data were analyzed using multiple linear regression with the assistance of SPSS. The results show that financial literacy has a positive and significant effect on MSME performance (β = 0.206; t = 5.753; p < 0.001), while financial reporting quality also has a positive and significant effect (β = 0.390; t = 9.778; p < 0.001). The model explains 42.9% of the variation in MSME performance (R² = 0.429). These findings contribute to the literature by integrating owner-level financial capability and financial information quality within a single framework for explaining MSME performance. The study suggests that improving MSME performance requires not only strengthening financial knowledge and decision-making skills but also improving the quality of financial information used for business management.
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