Financial Literacy Levels of Small Businesses Owners and it Correlation with Firms' Operating Performance

“Financial Li e acy Le els o Small Businesses Owne s and i Co ela ion wi h Fi ms’ Ope a ing Pe o mance” by Tânia Isabel Mendes Fe nandes [email p o ec ed] Mas e in Finance Disse a ion Supe iso P o esso Cláudia Alexand a Gonçal es Co eia Ribei o 2015 ii Biog aphical No e Tânia Fe nandes was bo n on Ap il o 1986, in Maia. The mas e s uden inished he deg ee in Business Adminis a ion by Faculdade de Economia do Po o in 2008 and h ee yea s la e ini ia ed he Mas e in Finance. A p o essional le el, she began he ca ie in a summe in e nship a Banco de Po ugal (2008), ollowed by a p o essional in e nship in Be a, a en u e capi al socie y (2008/2009) and du ing he ollowing 4 yea s wo ked as a c edi isk analys a No ga an e, S.A. Today, and since May o 2014, she is gi ing succession o he pa en s’ company, which is a mic o en e p ise o elec ical equipmen . Also, since 2011, she is olun ee in Cen o de Apoio ao Sem Ab igo (C.A.S.A), which he main aim is o eed homeless and people in need. iii Abs ac In ecen yea s, a e he impac o he well-known inancial c isis, go e nmen s a ound he wo ld s a ed o exp ess hei conce n abou he le els o inancial illi e acy among hei ci izens, being his p oblem widely e e ed as an agg a a ing ac o o his c isis. As a esul , esea ch on inancial li e acy has been de eloped by, bu mainly ocused on pe sonal inance issues in ol ing he gene al public, lea ing a gap wi h espec o he inancial li e acy le els among small businesses owne s. Financial li e acy is seen as an impo an ins umen o he success o small businesses, since i helps o unde s and and e alua e he in o ma ion needed o make daily decisions ha ha e inancial impac s in companies’ day- o-day managemen . The e o e, he goal o his esea ch is wo old: o assess he inancial li e acy le els o small business owne s (mic o en e p ises and small en e p ises) in he No h o Po ugal and o analyze he ela ion be ween hese esul s and he ope a ing pe o mance o hose companies, as a measu e o business economic pe o mance. The s udy es s he hypo hesis ha , all o he ac o s being cons an , a highe inancial li e acy le el o small business owne s should mo i a e a be e pe o mance o he company. The ele ance a ound he chosen a ge is jus i ied by he ac ha small businesses, de ined by mic o en e p ises and small en e p ises, a e an impo an d i e o he Po uguese economy since hey ep esen 35% o he o al e enues in 2013, h ough 98% o an uni e se o 380.000 companies, and employ a meaning ul pa o na ional wo k o ce. The sample in his s udy is composed by small businesses o he No h o Po ugal, speci ically om he egions o Po o, B aga, Viana do Cas elo and Vila Real, and h ough ques ionnai es i was ob ained he da a needed o gauge he le els o inancial li e acy. The esul s e idence a a he le el o inancial li e acy among small business owne s o he mic o and small business in he No h o Po ugal. And, he da a also suppo s he exis ence o a signi ican posi i e co ela ion be ween inancial li e acy le els and companies’ ope a ing pe o mance. This esul highligh s he impo ance o p o iding o small business owne adequa e inancial educa ion on he expec a ion o imp o ing hei pe o mance as business leade s. i Key-wo ds: inancial li e acy, inancial c isis, small business owne s, ope a ing pe o mance. Gene al Index Abs ac ............................................................................................................................ iii Index o Tables ................................................................................................................ i Index o Cha s .............................................................................................................. iii 1. In oduc ion ............................................................................................................... 1 2. Li e a u e Re iew: Financial Li e acy and Small Businesses Pe o mance ............. 4 2.1 Financial Li e acy ............................................................................................. 4 2.2 Financial Li e acy and Small Business Pe o mance......................................... 8 2.3 Assessmen o business owne s’ inancial li e acy le els ........................... 13 3. S udy Objec i es and Hypo hesis ......................................................................... 16 4. Me hodology and Da a ....................................................................................... 19 4.1 Ques ionnai e ............................................................................................... 19 4.2 Sample .......................................................................................................... 20 4.2.1 Sample Size De e mina ion ...................................................................... 20 4.2.2 Sample Cha ac e iza ion ........................................................................... 23 4.3 Financial Li e acy Index............................................................................... 26 4.4 Ope a ing Pe o mance Model ..................................................................... 27 5. Resul s analysis ....................................................................................................... 29 5.1 Desc ip i e analysis o esul s – Financial Li e acy Index .............................. 29 5.2 S a is ical analysis o he ac o s ha in luence he inancial li e acy index o small business owne s ................................................................................................. 35 5.3 Ope a ing Pe o mance Resul s ....................................................................... 43 6. Conclusions ............................................................................................................. 47 Bibliog aphy ................................................................................................................... 49 Appendix A - Ques ionnai e ........................................................................................... 52 i Index o Tables Table 1 –Global Planned and Pe o med Sample ............................................................ 22 Table 2 – Mic o En e p ises: Planned and Pe o med Sample dis ibu ed by egions o he No h o he coun y................................................................................................... 22 Table 3 - Small En e p ises: Planned and Pe o med Sample dis ibu ed by egions o he No h o he coun y................................................................................................... 22 Table 4 – Dis ibu ion o Business Ac i i y Codes (2 Digi Codes) ............................... 23 Table 5 – Financial Li e acy Index (FLI) and co esponding a ing le el ...................... 28 Table 6 – Indus y Dummies Va iables ........................................................................... 28 Table 7 – Desc ip i e S a is ics: Fi ms Re enues and Numbe o Wo ke s ................... 29 Table 8 – Desc ip i e S a is ics: O iginal and Global Financial Li e acy Index ............. 30 Table 9 – Ra ing Equi alence o Financial Li e acy Index ............................................. 30 Table 10 – Small Business Owne s’ Ra ing: Index Resul s s. Sel -E alua ion ............ 31 Table 11 – Desc ip i e S a is ics: Pa ial Financial Li e acy Index ................................ 31 Table 12 – No mali y Tes s ............................................................................................. 35 Table 13 – Hypo hesis 1: “Male small business owne s p esen highe inancial li e acy le els han emale gende .” – K uskal-Wallis es .......................................................... 37 Table 14 – Hypo hesis 2: “Small business owne s wi h highe educa ion p esen highe inancial li e acy le els.” – K uskal-Wallis es .............................................................. 38 Table 15 – Hypo hesis 3: “Small business owne s wi h educa ion in/o ela ed wi h economics p esen highe inancial li e acy le els.” – K uskal-Wallis es .................... 39 Table 16 – Hypo hesis 4: “Younge small business owne s p esen lowe inancial li e acy le els.” – K uskal-Wallis es ............................................................................. 40 Table 17 – Hypo hesis 5: “The inancial li e acy le els o small business owne s a e highe in bigge i ms” – K uskal-Wallis es ................................................................. 41 Table 18 – Hypo hesis 6: “The small business owne s esponsible o companies’ inancial a ea p esen highe inancial li e acy le els han hose who us he inancial a ea o ex e nal en i ies.” – K uskal-Wallis es .............................................................. 42 Table 19 – Hypo hesis 7: “The e is a posi i e ela ion be ween he inancial li e acy le els o small business owne s and he pe o mance o hei i ms”. – K uskal-Wallis es .................................................................................................................................... 42 ii Table 20 – Desc ip i e S a is ics ..................................................................................... 43 Table 21 – Pea son co ela ion coe icien s .................................................................... 44 Table 22 - Resul s o OLS Reg ession o Adap ed Ope a ing Pe o mance Model........ 45 iii Index o Cha s Cha 1 – Age o small business owne s’ esponden s .................................................... 24 Cha 2 – Educa ion le el o small business owne s ....................................................... 25 Cha 3 – Financial a ea esponsible................................................................................ 26 Cha 4 – A e age Financial Knowledge Index .............................................................. 32 Cha 5 – Realiza ion o he business plan a he beginning o he ac i i y .................... 33 Cha 6 – F equency o company’s p o i abili y analysis ............................................... 34 Cha 7 – F equency o cash- low o ecas p epa a ion .................................................. 34 1 1. In oduc ion Since he mo gage c isis, go e nmen s a ound he wo ld s a o exp ess conce ns abou he le els o inancial illi e acy among hei ci izens, mainly due o he daily con i ma ion o he inc easing o consume o e indeb edness and, also, o household bank up cy a es. Mo eo e , he inancial illi e acy has been widely e e ed as an agg a a ing ac o o his inancial c isis (A kinson and Messy, 2011). As a consequence, i is also de ended ha inancial li e acy should be seen as a public policy objec i e in o de o imp o e wel a e h ough be e decisions making and mi iga e he asymme y be ween he inal consume and, mainly, he inancial ins i u ions (Hus on, 2010). These conce ns we e apidly expanded o he scien i ic communi y and, nowadays, i is no iced a huge g ow h o esea ch based on inancial li e acy ma e , mos ly in ela ion wi h he accu a e inancial li e acy le els, which a e seen as indica o s o sus ain he need o inancial educa ion (Hus on, 2010). Ano he eason o his ecen g ow h on esea ch is ela ed wi h he e ec s o inancial li e acy on indi idual e i emen planning success. The inc easing conce n o go e nmen s a ound he wo ld wi h he s aining employe - sponso ed o he Social Secu i y Sys em, mainly caused by ise o li e expec ancies and alling o bi h a es, is opening a doo o inancial li e acy as one o he solu ions o his ma e . Th ough inancial educa ion go e nmen s would be able o encou age hei ci izens o ake mo e sel - esponsibili y o hei e i emen incomes. (Lusa di and Mi chell, 2011b).. Despi e he impo ance o small businesses in many economies, he majo esea ch done so a is mainly ocused on pe sonal inance issues o gene al public, lea ing a gap o he analysis o he le els o inancial li e acy among small businesses (B own e al., 2006). Po uguese economy is g ea ly dependen on he small businesses’ ac i i y, including small en e p ises 1 and mic o en e p ises 2 . In he ac , in 2013 hese small businesses accoun ed o 35% he o al e enue o ou coun y and o 53% o he o al employmen (Banco de Po ugal, 2014). 8 2.2 Financial Li e acy and Small Business Pe o mance The a e li e a u e abou small business owne ’s inancial li e acy p o ides a sligh ly di e en de ini ion o inancial li e acy, being he main dis inc ion ela ed wi h he unde s anding o in o ma ion p o ided by inancial s a emen s. Ins ead o inancial knowledge being only ocus on he comp ehension o bo owing and sa ing ma e s, in e es compounding, concep o in la ion and isk di e si ica ion. A small business owne mus be able o e alua e he in o ma ion needed o make decisions ha ha e inancial ami ica ions o consequences on he business. Acco ding o B own e al. (2006), inancial li e acy o small business owne s mus con empla e he abili y o ead and unde s and undamen al inancial s a emen s, as well as, he abili y wi h numbe s, in o de o make in o med judgmen s and o make e ec i e decisions ega ding he use and managemen o money. A ecen wo k om wo au ho s desc ibes inancial li e acy as “ he abili y o unde s and and use business inancial s a emen s o gene a e key inancial a ios o e alua e and manage a business.” – (Pea l and Eileen, 2014) Despi e he de ini ion o inancial li e acy ega ding pe sonal inance issue be mo e de eloped and widely accep ed, he de ini ion o inancial li e acy ega ding small business is much mo e demanding, no only, o inancial knowledge, which mus con empla e he capabili y o ead and unde s and inancial s a emen s in o ma ion, bu also in inancial beha io , wi h he habi s conce ned wi h he analysis o inancial in o ma ion, and inancial p e e ences o a i udes, which mus be posi i ely co ela ed wi h inancial knowledge and beha io , in he momen o aking he daily managemen decisions. Howe e , as i has no been gi en much a en ion o inancial li e acy o small businesses owne s, he li e a u e does no p o ide an emb acing de ini ion o inancial li e acy in business con ex . Di e ing o wha happens wi h inancial li e acy o pe sonal inance issues. Since many economies a ound he wo ld a e dependen o he success o small businesses, which is also he case o Po ugal, i is impo an no only p o ide he le els o inancial li e acy o gene al public, bu also gauge he le els o inancial li e acy o small businesses owne s. 9 In mos o small businesses is common o ind i s owne as an employee, which is mainly ocus on he ope a ional a ea o he business, o ge ing he s a egy and planning o he business ac i i y, and whe e inancial educa ion could make he di e ence, by imp o ing business owne s’ inancial skills. In ac , B own e al. (2006), wi h an educa ional p og am, e idence he ise o inancial li e acy among en ep eneu s, and Pea l and Eileen (2014) could e idence he ela ion be ween inancial li e acy and he success o small businesses, by clea ing he connec ion be ween he inadequa e inancial li e acy and inancial di icul ies expe ienced by en ep eneu s. Acco ding o Banco de Po ugal, be ween 2010 and 2013, on a e age, he numbe o small business, mic o en e p ises and small en e p ises (acco ding o he di ision se by Po uguese law, unde he 2 nd a icle o he dec ee-law n . 372/2007), inc eased 1% pe yea , despi e he numbe o Po uguese employed by hose companies dec eased 2% pe yea . Mainly due o small en e p ises since mic o en e p ises egis e ed a di e en pa h by g owing 1.7% pe yea . The o al e enue o small business a ha imeline has an un a o able pe o mance by alling a ound 4% pe yea , bu s ill ep esen ing 35% o o al e enue, in 2013. Despi e his e olu ion, and acco ding o he same sou ce, in 2013, he mic o and small en e p ises oge he employed 53% o Po uguese wo ke s, agains 27% o big en e p ises and 20% o medium en e p ises. The s udies a li e a u e abou small business owne ’s inancial li e acy a e e y sca ce and i was no ound anyone simila o he p esen esea ch in o de o es ablish a benchma k. Sage (2012) ca ied ou a su ey abou Canadian Small Business Financial Li e acy, wi h a sample o 300 small businesses, whe e i gauges he pe cep ions, knowledge and habi s o small business owne s ela ed wi h inancial and esou ces managemen . The main esul s o his su ey p o ide he pe cep ion o he esponden s abou he a eas hey need o lea n mo e abou ( inancial planning, ax paymen and cash- low), he a eas hey eel mo e com o able wi h (dealing wi h clien s, dealing wi h supplie s and managing he inances o hei businesses) and he a eas whe e hey ail mos o he 10 ime (dealing wi h axes, managing sales and ma ke ing and managing he inances o hei businesses). Despi e he in e es ing inding o Sage Canadian Su ey, hei esul s a e based on esponden s’ pe cep ions and no so much on speci ic unde s anding o inancial s a emen s, co esponden o he inancial knowledge, which is a undamen al pilla o p o ide accu a e le els o inancial li e acy. Addi ionally, some o he ques ion o his su ey whe e asked in o de o unde s and he equency o usage o echnology and accoun ing so wa e, which is easonable conside ing he ins i u ion which ca y ou he s udy. B own e al. (2006) ca ied ou a s udy based on inancial li e acy o small businesses owne -en ep eneu s in hei i s yea o ac i i y. The basis o his s udy is se led on a p og am called “T aining in Business Basics”, specially c ea ed o his popula ion a ge o new small businesses wi h less han en employees. The au ho s, in o de o ca y ou hei s udy, p o ide 147 small businesses o Uni ed Kingdom in hei i s h ee yea s o li e wi h educa ional modules based on basic inance. The a gumen behind his s udy is on he belie ha small business owne s wi h he adequa e inancial educa ion will be less needed o accoun an s and inancial ad iso s on us , in o de o unde s and he inancial posi ion o hei companies and make in o med inancial decisions by hei own. Al hough, and simila ly o Sage (2012), he majo indings o hese au ho s a e mainly ela ed o pe cep ions o inancial awa eness and li e acy, hey concluded ha , e en hough he pa icipan s appea ed o be awa e o hei own lack o inancial li e acy, s ill hey did no pe cei e he impo ance o his ma e in ela ion o o he aspec s o unning a small business. Pea l and Eileen (2014) su eyed 14 small businesses owne s in Flo ida in o de o de e mine hei le el o inancial unde s anding and hei usage habi s o inancial s a emen s in making managemen decisions, which is almos he same o say, ha hey we e gauging he le els o inancial li e acy. Since, acco ding o hei s udy Small- Business Financial Li e acy is de ined “as he abili y o unde s and and use business inancial s a emen s o gene a e key inancial a ios o e alua e and manage a business”. 11 The ques ions used in hei su ey ocused mainly in wo o he h ee pilla s ha sus ain he de ini ion o inancial li e acy widely accep ed acco ding o he li e a u e: Financial Knowledge and Financial Beha io s, excluding, Financial A i udes. The au ho s mainly conclude wi h his case s udy ha was a clea connec ion be ween lack o inancial li e acy and inancial di icul ies expe ienced by en ep eneu s, and adequa e inancial educa ion can pa ially dec ease he inancial di icul ies. Cou o (2013) s udied he Po uguese en ep eneu s inancial li e acy le els o incuba o s’ companies o No h and Cen e o Po ugal, al hough he ques ionnai e used in o de o ca y ou he wo k was essen ially based in ques ions abou en ep eneu s con idence le els and inancial beha io , wi hou include any ques ion abou inancial knowledge, which is a pilla , no only, o inancial li e acy in pe sonal inance issues, bu also a main ma e in gauging he inancial li e acy le els o small business owne s acco ding o he li e a u e. Despi e his gap, he majo indings o he wo k shown ha 66% o s udied sample p esen a good le els o inancial li e acy. Conside ing he s udies ound so a a li e a u e abou he inancial li e acy le els o small business owne s, i is possible o no ice ha he e is no one ha could possible se e as a benchma k o he p esen esea ch. This gap a li e a u e sus ain he need o his in es iga ion, which has wo main goals: assess he le els o inancial li e acy o small business owne s and co ela e his li e acy le el wi h hei i ms’ pe o mance. To he bes o ou knowledge, he e a e no s udies in he li e a u e analyzing he ela ion be ween he companies’ ope a ing pe o mance and he inancial li e acy le els o small business owne s. This is qui e no mal due he sca e li e a u e abou inancial li e acy among small business owne s. Since i is especially he owne o he s uc u e and unc ioning o he boa d ha can di ec ly a ec he ope a ing e iciency and ope a ing pe o mance o he company, he a gumen behind he s udy o he ela ion be ween hese wo a iables, ope a ing pe o mance and business owne s’ inancial li e acy le els, is on he belie ha a high le el o inancial li e acy o a business owne should posi i ely in luence i m’s ope a ing pe o mance, h ough hei inancial knowledge, a i udes and beha io s. 12 The expec ed esul s o his ela ion o , in o he wo ds, acing an expec ed posi i e co ela ion be ween he men ioned a iables, will no only s eng hen he esul s ob ained h ough he buil ques ionnai e, bu also, i will wo ks as a e idence o he need o educa ion owa ds inancial ma e s. The sea ch o he ope a ing pe o mance model a li e a u e was mainly conce ned wi h he cha ac e is ics o hose a iables, he ope a ing pe o mance as dependen a iable and he inancial li e acy le els as an independen a iable and also measu ed as a a ing on a scale o 5 o 1, whe e, in ou s udy, 5 ep esen s a e y high inancial li e acy le el and 1 a e y low inancial li e acy le el. Fo his s udy an adap a ion o Bauwhede (2009) model is used. Bauwhede analyses he ela ion be ween co po a e go e nance compliance and ope a ing pe o mance o a se o la ge lis ed Eu opean companies. The model explains i m’s ope a ing pe o mance, measu ed by Re u n on Asse s (as a p oxy), h ough he ollowing a iables: CG Comp, which is a a ing p oxying o he ex end o compliance wi h in e na ional bes p ac ices ega ding boa d s uc u e and unc ioning o i ms; LEV, measu ed by le e age a io; LNTA, o i m dimension, measu ed by he na u al loga i hm o o al asse s; and a indus y dummy a iable. The main a iables o his model, ope a ing pe o mance and a ing as a p oxy o he ex en o compliance wi h in e na ional bes p ac ices ega ding, ha e simila cha ac e is ics o he a iables ha he s udy o he ela ion be ween ope a ing pe o mance and inancial li e acy le els o small business owne s ha e. The ope a ing pe o mance as dependen a iable is he same and i measu e is he e u n on asse s (ROA) which is designed by he di ision o ope a ing income by he a e age o beginning-and-ending-pe iod book alue o o al asse s. Whe e ope a ing income, acco ding o Lough an and Ri e (1997), is de ined as OIBD and measu ed as ope a ing income be o e dep ecia ion, amo iza ion, and axes, plus in e es income. This is he measu e o ope a ing pe o mance mos commonly used, among o he s, by he s udies pe o med by Lough an and Ri e (1997), Deshmukh e al. (2015), and Pea l and Eileen (2014). Al hough o he au ho s go u he by saying: “The ROA is clea ly he p e e ed measu e o ope a ing pe o mance because i is less a ec ed by 13 disc e iona y i ems han he ROE and he NPM.” - Bauwhede (2009). Whe e ROE is he e u n on equi y measu e, and NPM is ne p o i ma gin measu e. The mos ele an independen a iable, a a ing p oxying o he ex en o compliance wi h in e na ional bes p ac ices ega ding boa d s uc u e and unc ioning o i m i in yea , simila o he p esen s udy, he a ing is measu ed on a scale o 5 o1. 2.3 Assessmen o business owne s’ inancial li e acy le els A ound he wo ld, he measu emen o inancial li e acy is mainly conce ned wi h pe sonal inance issue o he gene al public (B own e al., 2006). Lusa di and Mi chell (2011), in hei wo k e e he di icul y o measu e he inancial a i udes and inancial beha io s in o de o achie e inancial li e acy le els. Based on ha , and keeping in mind ou key p inciples: simplici y, ele ance, b e i y and capaci y o di e en ia e, hey design h ee ques ions which p o ide answe s o h ee impo an economic concep s ha indi iduals should ha e in o de o make inancial decisions, which a e: (1) unde s anding o in e es compounding; (2) unde s anding o in la ion; and (3) unde s anding o isk di e si ica ion. These ques ions ha e been used in se e al s udies as a benchma k o allow o in e na ional compa isons o inancial li e acy le els, such as, Lusa di and Mi chel (2009); Financial Capabili y S udy (2010); Lusa di e al.(2010); Banco de Po ugal (2010); Lusa di and Mi chell (2011a); A kinson and Messy (2012). And hey a e: (1) “Suppose you had $100 in a sa ings accoun and he in e es a e was 2% pe yea . A e 5 yea s, how much do you hink you would ha e in he accoun i you le he money o g ow? Mo e han $102 Exac ly $102 Less han $102 Do no know Re use o answe 14 (2) Imagine ha he in e es a e on you sa ings accoun was 1% pe yea and in la ion was 2% pe yea . A e 1 yea , how much would you be able o buy wi h he money in his accoun ? Mo e han oday Exac ly he same Less han oday Do no know Re use o answe (3) Please ell me whe he his s a emen is ue o alse. 'Buying a single company's s ock usually p o ides a sa e e u n han a s ock mu ual und'. T ue False Do no know Re use o answe ” Despi e he impo an in o ma ion p o ided by he answe s o hose ques ions, he au ho s exp essed ano he conce n wi h he di icul y in es ablish compa isons abou he esul s o pas s udies, since he ques ions di e a lo ac oss coun ies (Lusa di and Mi chell, 2011b). In o de o o e pass his di icul y, OECD has made so a he majo imp o emen s conce ned wi h benchma ks o inancial li e acy le els. This o ganiza ion p oposed a comple e ques ionnai e ha includes ques ions abou : Financial Knowledge, Financial Beha io and Financial A i udes (A kinson and Messy, 2012). This ques ionnai e was on he base o pilo p ojec which aimed o gauge he le els o inancial li e acy in 14 coun ies a ound he wo ld, and o he e y i s ime, his o ganiza ion was able o p o ide o he wo ld a benchma k o inancial li e acy le els among 14 coun ies (A kinson and Messy, 2012). In Po ugal, in 2010, Banco de Po ugal s udied he le els o inancial li e acy o Po uguese popula ion h ough a implemen a ion o a ques ionnai e which include some ques ions ela ed wi h he unde s anding o in e es compounding, unde s anding o 15 in la ion and unde s anding o isk di e si ica ion, acco ding o he con ibu e o he au ho s Lusa di and Mi chell (2011). And he main goal o his p ojec was o dec ease he asymme ic in o ma ion be ween ci izens and inancial ins i u ions since, hey belie e ha “mo e in o med ci izens a e able o be e lea n he in o ma ion ha is ansmi ed o hem by inancial ins i u ions, helping o moni o ma ke s” – (Banco de Po ugal ,2010). Las ly, i is impo an o no e ha he ques ionnai es used a he e e ed wo ks we e designed o assess he le els o inancial li e acy o pe sonal inance issues, al hough hey a e a key e e ence in he assessmen o inancial li e acy le els among small business owne s. 16 3. S udy Objec i es and Hypo hesis The e a e wo main objec i es o his s udy: o assess he li e acy le els among he small business owne s in he No h o Po ugal and o analyze he ela ion o inancial li e acy le els wi h he i m pe o mance. The assessmen o he le els o inancial li e acy among small business owne s in ends o ill in a gap in he li e a u e e iew by c ea ing an index, simila ly o he wo k de eloped by Banco de Po ugal, in 2010, when s udying he inancial li e acy le els o Po uguese popula ion, which enables he compa ison be ween e e y small business owne . This index will be p esen ed u he on, as well as, he explana ion abou i s cons uc ion. Fo his pa o he analysis he s udy hypo hesis a e as ollows. Hypo hesis 1: “Male small business owne s p esen highe inancial li e acy le els han emale gende ” Acco ding o he s udy o A kinson and Messy (2012), despi e being ocused in pe sonal inance issues, hese au ho s s a ed ha male gende p esen highe inancial li e acy le els. Cou o (2013), in he in es iga ion o inancial li e acy le els among en ep eneu s, also es ed he di e ences be ween male and emale en ep eneu s inancial li e acy le els and, al hough on a e age he emale en ep eneu s p esen ed a lowe le els o inancial li e acy compa ed o male gende , she did no ound s a is ical signi icance in he es s. 17 Hypo hesis 2: “Small business owne s wi h highe educa ion p esen highe inancial li e acy le els” B own e al. (2006), A kinson and Messy (2012), Banco de Po ugal (2010) and, also, Cou o (2013) ound e idence ha low le els o educa ion we e associa ed wi h lowe le els o inancial li e acy. Hypo hesis 3: “Small business owne s wi h educa ion in/o ela ed wi h economics p esen highe inancial li e acy le els” B own e al. (2006) conduc ed a s udy whe e i was demons a ed he inc ease o inancial li e acy le els among owne manage s, h ough a yea p og am o inancial educa ion. Cou o (2013) ound also e idence ha en ep eneu s wi h educa ion in economics a ea p esen ed highe le els o inancial li e acy. Hypo hesis 4: “Younge small business owne s p esen lowe inancial li e acy le els”. The e idence in he li e a u e abou his hypo hesis i is no consensual. B own e al. (2006) and Banco de Po ugal (2010) ound e idence o lowe le els o inancial li e acy among young en ep eneu s, in he case o he i s au ho , and among younge indi idual, in he case o he second. Ins ead, Cou o (2013) conside ed he sample composed wi h a majo i y o younge en ep eneu s and he majo indings whe e ha hey possess good le els o inancial li e acy. 24 In ela ion o gende , he majo i y o he esponden s a e male, 71% o he sample, agains 29% ha ep esen he emale gende . The majo i y o he esponden s ha e mo e han 35 yea s old (86%), al hough wi h a highe concen a ion in he g oup age be ween 35 and 44 yea s (32%), as can be obse ed in Cha 1. The majo i y o he esponden ’s p esen s an educa ion le el lowe han he highe educa ion (70%), and only 30% p esen s an educa ion le el wi h Fi s Deg ee and Mas e Deg ee o highe (Cha 2). And only 9% o he esponden s ha e highe educa ion in economics. 0% 14% 32% 26% 24% 4% 0% 5% 10% 15% 20% 25% 30% 35% < 25 26 - 34 35 - 44 45 - 54 55 - 65 > 65 Cha 1 - Age o small business owne s' esponden s 25 Less han Compulso y Educa ion 11% Compulso y Educa ion ( 9 h yea ) 23% Highschool (12 h yea ) 36% Fi s Deg ee 24% Mas e 's Deg ee o highe 6% Cha 2 - Educa ion Le el o Small Business Owne s In ela ion o he us o inancial a ea o he companies, he majo i y o he business owne s ake ha esponsibili y, al hough ¼ o small business owne s’ esponden s us he inancial a ea o hei accoun an s (Cha 3). 66 28 9 Business Owne Accoun an Financial Depa men Cha 3 - Financial a ea esponsible 26 4.3 Financial Li e acy Index In o de o assess he inancial li e acy le els o small business owne s a he a ious dimensions conside ed in he ques ionnai e i was buil an index using he me hodology in Banco de Po ugal (2010). I is impo an o e e ha he index should no be in e p e ed in absolu e alues o he e alua ion o inancial knowledge, beha io s and a i udes o small business owne s. I can only be in e p e ed in ela i e e ms when compa ing alues among di e en g oups o indi iduals. The ques ions abou he esponden cha ac e iza ion we e no included in he index cons uc ion. The answe s o he ques ions o inancial knowledge, beha io and a i udes we e classi ied in a scale o (-2, -1, 0, 1, 2), in o de o p oduce a global indica o o inancial li e acy. Bu , no all he ques ions a e able o ha e his scale, due o he a iabili y o accep able answe s. In he inancial knowledge ques ions, he co ec answe ecei ed he maximum punc ua ion (2) and all he o he s he minimum (-2). In he ques ions ha e alua e he beha io , he maximum punc ua ion is a ibu ed o he mos app op ia ed beha io . As a esul , he index is cons i u ed h ough he a i hme ic sum o collec ed punc ua ion and hen ans o med in a scale om 0 o 100, being 0 he po en ial minimum and 100 he po en ial maximum o punc ua ion. Fu he on, he esul s a e displayed in a global index and a pa ial index, using he same me hodology in Banco de Po ugal (2010). The global index includes he sum o he punc ua ion in he h ee pilla s o inancial li e acy: inancial knowledge, inancial a i udes and inancial beha io . And, he pa ial index exhibi h ee sub-index o each o men ioned pilla s. 27 4.4 Ope a ing Pe o mance Model The ope a ing pe o mance model was adap ed om Baudwhede (2009) o analyze he ela ion be ween he inancial li e acy le els o he small business owne and he pe o mance o hei i ms. The analysis also con olled o he le e age, dimension and he ac i i y sec o o he i m. The model ha as used is: Pe o mance i = β 0 + β 1 Ra ing_FLI i + β 2 LEV i + β 3 LNTA i + β 4 X i + ε i Whe e: Pe o mance i = ROA o i m i; Ra ing_FLI i = a a ing om inancial li e acy index o i m i; LEV i = le e age a io o i m i; LNTA i = he na u al loga i hm o o al asse s o i m i; X i = a ec o o indus y dummies, i. e. indica o a iables o he Po uguese business ac i i y classes. ROA is he a io be ween he ope a ing income and he a e age o beginning-and- ending-pe iod book alue o o al asse s. The ope a ing income is measu ed by he ope a ing income be o e dep ecia ion, amo iza ion, and axes, plus in e es income. The a ing inancial li e acy index was scaled om 5 o 1, acco ding o he in o ma ion in Table 5. Table 5 – Financial Li e acy Index (FLI) and co esponding a ing le el FLI Ra ing Le el Be ween 0 and 25 1 Be ween 26 and 50 2 Be ween 51 and 70 3 Be ween 71 and 85 4 Be ween 86 and 100 5 28 Le e age a io mean o measu e he company’s deb le els, h ough he sum o sho - e m and long- e m deb di ided by o al asse s. LNTA is a p oxy o he dimension o he i m measu ed by he na u al loga i hm o o al asse s. X includes 12 dummy a iables o he e e y class o indus y o es ed sample (Table 6). Table 6 – Indus y Dummies Va iables Class Indus y Numbe o Fi ms C Manu ac u ing indus ies 13 F Cons uc ion 6 G Wholesale and e ail ade; epai o mo o ehicles and mo o cycles 41 H T anspo a ion and s o age 1 I Accommoda ion, es au an se ices and simila 9 J Ac i i ies o in o ma ion and communica ion 3 K Financial and insu ance ac i i ies 3 L Real es a e ac i i ies 1 M Ad iso y ac i i ies, scien i ic, echnical and simila 5 N Adminis a i e ac i i ies and suppo se ices 4 P Educa ion 1 R A is ic ac i i ies, shows, spo and leisu e 1 88 29 5. Resul s analysis 5.1 Desc ip i e analysis o esul s – Financial Li e acy Index The companies ha made pa o his s udy mainly belong o ade indus y, being 24% om he e ail indus y and 18% om he wholesale indus y. Table 7 exhibi s he desc ip i e s a is ics o i ms’ e enue and numbe o wo ke s. Al hough he maximum alues a e e y high, he medians a e compa ably lowe , due he sample be composed mainly o mic o en e p ises. Table 7 – Desc ip i e S a is ics: Fi ms Re enue and Numbe o Wo ke s Maximum Minimum Mean Median To al Re enue 10.160.221€ 8.122€ 630.000€ 224.000€ Numbe o Wo ke s 42 1 7 4 The majo i y o he companies ha e mo e han 10 yea s in he ma ke , ha ing 35% mo e han 20 yea s. The a e age o he ma u i y ound on he sample is o 19 yea s, al hough he median is lowe in 14 yea s, and he oldes company has 89 yea s and he younge 3 yea s. I is impo an o no e ha 15 o he companies a e egis e ed as sole ade s and hose inancial s a emen s a e no a ailable on SABI pla o m, as well as gene al in o ma ion, so 15 % was excluded om he o al e enue, numbe o wo ke s and ma u i y in o ma ion gi e abo e. In ela ion o global inancial li e acy index, which comp ise he h ee componen s o inancial li e acy de ini ion ( inancial knowledge, beha io and a i udes), he minimum punc ua ion obse ed is 3 and maximum almos hi s he 100 wi h 91, as is possible o see in able below abou he desc ip i e s a is ics o he ob ained inancial li e acy index (Table 8). 30 Table 8 – Desc ip i e S a is ics: O iginal and Global Financial Li e acy Index Minimum Obse ed Maximum Obse ed Mean Median S anda d De ia ion O iginal Financial Li e acy Index -32 28 2 3 14 Global Financial Li e acy Index 3 91 53 54 21 The a e age and he median a e e y nea o each o he wi h, espec i ely, 53 and 54, sugges ing ha , on a e age, he Po uguese small business owne s p esen a he low inancial li e acy le el. Table 9 p esen s he dis ibu ion o esponden s ac oss inancial li e acy a ing le els showing ha 44% o he esponden s ha e ex emely low inancial li e acy le els. Table 9 – Ra ing equi alence o Financial Li e acy Index Punc ua ion in % Ra ing Le el % o Small Business Owne s Be ween 0 and 25% 1 11% Be ween 26 and 50% 2 33% Be ween 51 and 70% 3 31% Be ween 71 and 85% 4 19% Be ween 86 and 100% 5 6% The eason why behind he ac ha punc ua ion in pe cen age ( i s column o able 4) does no p esen a uni o m dis ibu ion is because only abo e 50% he small business owne s p esen ed a posi i e punc ua ion a he o iginal index, meaning ha he co ec answe s a e abo e he w ong answe s. The compa ison o hese esul s wi h he sel -e alua ion ques ion abou he esponden s’ inancial li e acy le el: “On a scale o 1 o 5, whe e 1 is bad and 5 is e y good, wha do you conside o be you le el o inancial li e acy? (Financial li e acy is a combina ion o awa eness, knowledge, skills, a i udes and beha io needed o make sound inancial 31 decisions, in o de o achie e indi idual inancial well-being.)”, is p esen ed a he Table 10. Table 10 – Small Business Owne ’s Ra ing: Index Resul s s. Sel -E alua ion Punc ua ion in % Ra ing % Responden s Index Resul s s % Responden s Sel -E alua ion Be ween 0 and 25% 1 11% 0% Be ween 26 and 50% 2 33% 11% Be ween 51 and 70% 3 31% 52% Be ween 71 and 85% 4 19% 34% Be ween 86 and 100% 5 6% 3% The esul s sugges ha he esponden s end o o e es ima e hei inancial capabili ies. This only no happen in he g oup wi h highe knowledge and is pa icula ly accen ua ed in he lowe le el o inancial li e acy whe e none o he 11% o en ep eneu s ecognize o be in ha si ua ion. Conside ing he pa ial inancial li e acy le el, di ided by he h ee componen s o inancial li e acy de ini ion, he highes punc ua ion is eached in Financial A i udes and Beha io s. The Financial Knowledge did no go u he han he 89 poin s as a maximum, acco ding o he Table 11. Table 11 – Desc ip i e S a is ics: Pa ial Financial Li e acy Index Minimum Obse ed Maximum Obse ed Mean Median S anda d De ia ion Knowledge 0 89 50 56 24 A i udes 0 100 80 83 25 Beha io 0 100 41 33 30 The Financial Knowledge ques ions a e di ided in wo g oups. The i s i e ques ions a e ela ed o s anda d inancial li e acy issues o pe sonal inance (in e es compounding, in la ion and isk di e si ica ion) by he au ho s A kinson and Messy (2012), bu ans o med o he business en i onmen . 32 The las ou ques ions a e abou knowledge o inancial s a emen s gi en ha , acco ding o au ho s B own e al. (2006) and Pea l and Eileen (2014), inancial li e acy among small business owne s is de ined by hei le el o use and unde s anding o inancial s a emen s and analysis o inancial a ios in o de o make sound managemen decisions, analysis o inancial a ios. Acco ding o he Cha 4, on a e age small business owne s p esen a easonable knowledge abou in e es compounding, in la ion and isk di e si ica ion, bu a a he low unde s anding abou inancial s a emen ma e s, which is a p oblem ha only can be sol ed wi h educa ion. The Financial Beha io has he lowes punc ua ion a e age, wi h 41, con as ing wi h he highes a e age on Financial A i udes, wi h 80. Al hough i is impo an o no e ha he ques ions abou Financial A i udes and Financial Beha io we e p esen ed a he same g oup o ques ions due o i s connec ion be ween each o he , so on a e age he small business owne s ha e he igh a i ude owa ds de e mined subjec , bu in p ac ice hei ac ions o beha io do no e lec hei in en ions. Fo example, conside ing h ee ques ions add essed in he wo k o Cou o (2013) ela ed wi h he elabo a ion o he business plan a he beginning o he ac i i y, many esponden s conside ed i e y impo an , bu in p ac ice, be o e he opening o hei 63 34 Pe sonal Finance Issues Business Cha 4 - A e age Financial Knowledge Index 33 companies hey did no elabo a e a business plan. Only 37% o he business owne s elabo a e he business plan a he beginning o he ac i i y, while 80% o he esponden s conside ed impo an o e y impo an i ealiza ion no only a he beginning o he ac i i y bu also acing he need o an in es men (Cha 5). A simila analysis can be made o de ques ions 25 e 26 o he ques ionnai e (see Appendix A), which a e espec i ely: “Do you conside impo an he pe iodic analysis o company's p o i abili y, in o de o minimize cos s and maximize p o i s?” and “How o en do you i ?”, and a e ela ed wi h a c ucial pe iodic business p ocedu e which esul s in an impo an wa ning conce ned wi h business inancial heal h (Pea l and Eileen, 2014). Almos he o ally o he esponden s (90%) conside ed impo an o e y impo an he pe iodic analysis o company’s p o i abili y, bu mo e han hal o he esponden s (51%) ha e he w ong beha io owa ds his business p ocedu e since hey ne e o only once a yea do he company’s p o i abili y analysis, as i is possible no ice om he Cha 6. 37% 63% Yes No Cha 5 - Realiza ion o he business plan a he beginning o he ac i i y 40 Table 16 – Hypo hesis 4:” Younge small business owne s p esen lowe inancial li e acy le els” – K uskal-Wallis es Ca ego y: Business Owne Age Mean Ranks P- alue 26 – 34 yea s 55,18 0,187 35 – 44 yea s 50,27 45 – 54 yea s 58,46 55 – 65 yea s 50,00 O e 65 yea s 15,33 Hypo hesis 5: “The inancial li e acy le els o small business owne s a e highe in bigge i ms.” The company dimension o he p esen s udy hypo hesis is measu ed by he amoun o e enue in 2014 and he en i e sample was no included o his speci ic es , excluding he sole p op ie o ship businesses because hei inancial s a emen s a e no a ailable a SABI.  H 0 : The medians o global inancial li e acy index o small business owne s om companies wi h di e en sizes a e equal.  H 1 : The medians a e di e en . On he e e ed sample, which excludes he sole p op ie o ship businesses, on a e age he inancial li e acy le els inc eases wi h he size o he company and hose di e ences be ween he e enue ca ego ies p esen ed a he below able a e s a is ically signi ican , o a con idence le el o 95%. Wi h his esul i is possible o s a e ha he needs o inancial educa ion a e concen a ed in he owne s o smalle companies (Table 17). 41 Table 17 - Hypo hesis 5: “The inancial li e acy le els o small business owne s a e highe in bigge i ms.” – K uskal-Wallis es Ca ego y Re enue Mean Ranks P- alue Un il 10.000€ 2,50 0,0004 Be ween 10.001 and 100.000€ 29,61 Be ween 100.001 and 500.000€ 45,06 Be ween 500.001 and 2.000.000€ 55,25 O e 2.000.000€ 73,42 Hypo hesis 6: “Small business owne s esponsible o companies’ inancial a ea p esen highe inancial li e acy le els han hose who us he inancial a ea o accoun an s.”  H 0 : The medians o global inancial li e acy index o small business owne s esponsible o no o inancial a ea a e equal.  H 1 : The medians a e di e en . A he li e a u e was ound as a common p ac ice he us o inancial a ea o accoun an s (B own e al., 2006). The es esul s exhibi a di e ence s a is ically signi ican be ween he inancial li e acy le els o small business owne s who a e esponsible o hei inancial a ea and hose who us his a ea o hei accoun s. As a esul , he needs o inancial educa ion should ely on business owne s who a e no liable o hei companies’ inancial a ea since hey p esen lowe le els o inancial li e acy (Table 18). 42 Table 18 - Hypo hesis 6: “Small business owne s esponsible o companies’ inancial a ea p esen highe inancial li e acy le els han hose who us he inancial a ea o accoun an s.” – K uskal-Wallis es Ca ego y : Financial A ea Responsible Mean Ranks P- alue Business Owne 54,75 0,007 Accoun an 39,04 Financial Depa men 72,17 Hypo hesis 7: “The e is a posi i e ela ion be ween he inancial li e acy le els o small business owne s and he pe o mance o hei i ms.”  H 0 : The medians o global inancial li e acy index o small business owne s wi h a posi i e o a nega i e ROA a e equal.  H 1 : The medians a e di e en . The esul s (Table 19) highligh a posi i e ela ion be ween inancial li e acy le els and i ms’ pe o mance, measu ed by ROA, which s a is ically e idence a highe concen a ion o low le els o inancial li e acy among en ep eneu s whose i ms ha e a nega i e o null ROA. Table 19 – Hypo hesis 7: “The e is a posi i e ela ion be ween he inancial li e acy le els o small business owne s and he pe o mance o hei i ms” – K uskal-Wallis es Ca ego y :Fi ms’ Pe o mance Mean Ranks P- alue ROA nega i e o null 21.63 0,00000002 ROA posi i e 54,62 43 The esul s exhibi ha in all s udy hypo hesis was possible o p o e he di e ence be ween he medians o esponden s’ cha ac e is ics, excep o gende and g oups o age. The hypo hesis 7 esul s eng hens he needs o s udy he ela ion be ween inancial li e acy le els and i ms’ ope a ing pe o mance, measu ed by ROA as p oxy. 5.3 Ope a ing Pe o mance Resul s In his sec ion is exhibi ed he s a is ical analysis and esul s o he adap ed ope a ion pe o mance model desc ibed a Me hodology chap e . As al eady e e ed he en i e sample was no included o his pa o he s udy, excluding he sole p op ie o ship businesses because hei inancial s a emen s a e no a ailable a SABI, so ins ead o a sample o 103 companies, i was used a sample o 88 companies. Table 20 - Desc ip i e S a is ics Va iable N Mean S d De Min. Median Max. ROA 88 -0,050 0,065 -3,204 0,042 1,894 ROE 87 -0,197 0,228 -18,023 0,034 6,331 LEV 88 1,343 0,365 0,043 0,602 118,2 LNTA 88 12,143 0,165 8,474 12,179 15,691 The Table 20 p esen s desc ip i e s a is ics o dependen and independen a iables o he ope a ing pe o mance model. The ROE ( e u n on equi y) was in oduced as a independen a iable because his a iable was also used in o me s udies as a measu ed o ope a ing pe o mance, acco ding o he li e a u e, bu no as he p e e ed one. The mean o ROA is nega i e o -5% (median 4.2%). The mean o ROE is smalle , wi h -20% (median 3.4%), and also has one less obse a ion because he sample has an ou lie wi h a huge impac a esul s. The le e age mean is e y high abou 134% (median 60%), which can be jus i ied by he exis ence o some companies in he sample echnically bank up (18%). 44 Table 21 – Pea son co ela ion coe icien s ROA ROE RATING_FLI LEV LNTA ROA 1,000 ROE 1 0,435 1,000 RATING_FLI 0,433 0,131 1,000 LEV -0,750 -0,025 -0,321 1,000 LNTA 0,348 0,172 0,489 -0,373 1,000 The Table 21 p esen s he Pea son co ela ion coe icien s be ween he dependen and independen a iables o he ope a ing pe o mance model. The dependen a iable ROA is posi i ely co ela ed wi h RATING_FLI, as well as he dependen a iable ROE, al hough less co ela ed wi h he his independen a iable. Only he co ela ion o ROA and RATING_FLI is s a is ically signi ican . The highes absolu e alue o he co ela ions among he independen a iables is 0.75, which is indica i e ha he eg ession esul s migh no be a ec ed by mul icollinea i y. Acco ding o Pea l and Eileen (2014), he inancial di icul ies o small business owne s all in o h ee ca ego ies: loss o e enues, insu icien cash- low, and excessi e deb . Gene ally, in mos companies he loss o e enue is ela ed wi h he economy ecession, which, o cou se, is no con ollable by business owne s. Howe e , insu icien cash low and excessi e deb a e bo h a eas ha small business owne s can manage, gi en su icien Financial Li e acy. In he sample o he p esen wo k, excluding sole p op ie o ship businesses, 31% ha e nega i e ROA in 2014, howe e only 37% we e expe iencing his o ical losses o e enue, in he las 3 yea s, on a e age highe han 5% pe yea . 1 ROE: Re u n on Equi y o i m i, and is measu ed by he ne income di ided by he book alue o s ockholde s’ equi y 45 And, he majo i y o he e e ed sample (58%) has excess o deb , wi h a le e age a io highe han 50%, howe e only 27% o hose companies we e acing his o ical losses o e enue, in las 3 yea s, on a e age highe han 5% pe yea , which means ha he emaining 73% companies wi h excess o deb and he emaining 63% wi h nega i e ROA can possibly imp o e i wi h app op ia e inancial educa ion. Table 22 epo s wo columns o esul s o he OLS eg ession analysis, using as he independen a iable he ROA, he i s wi h he inclusion o 12 a iables dummies o indus y ac i i y and he o he wi hou he inclusion. The ROE was no included due o i s non-s a is ically signi ican co ela ion wi h he dependen a iable RATING_FLI acco ding o Pea son co ela ion coe icien s. Table 22 – Resul s o OLS Reg ession o Adap ed Ope a ing Pe o mance Model Va iable ROA Coe icien es ima e ( -s a is ic) In e cep -0.226 (-0.433) -0.144 (-0.395) RATING_FLI 0.103** (2,308) 0.118*** (2.755) LEV -0.110*** (-8.124) -0.121*** (-9.131) LNTA -0.004 (-0.133) -0.006 (-0.192) Indus y dummies Included - R 2 71.3% 60.4% Adjus ed R 2 65.3% 59% S d De ia ion 0.36 0.39 N 88 88 Deg ees F eedom 72 84 No e: ** and *** deno e s a is ical signi icance a he 5% and 1% le el espec i ely. Resul s on he indus y dummies a e no epo ed o pa simony. 46 A bo h eg essions, he a iables RATING and LEV a e s a is ically signi ican . The excep ion is in he a iable LNTA, al hough i was also eg essed his model eplacing his a iable by he o al asse s o i ms and he esul s also did no e idence s a is ical signi icance. The doub o whe he o no include he dummy a iables o indus y ac i i y was sol ed by he F es o quali y imp o emen o he adjus men (Table 23), wi h he ollowing hypo hesis es s. H o : Coe icien s associa ed o he 12 dummies all simul aneously equal o ze o. H 1 : A leas one is di e en o ze o. Table 23 – Quali y Imp o emen o he Adjus men – F es F obs F c i 2.28 1.92 Fo a con idence le el o 95%, is ejec ed H o (F obs > F c i ), which allow o conclude ha he in oduc ion o he 12 indus y dummies signi ican ly con ibu es o he quali y imp o emen o he adjus men The eg ession o he adap ed model (Table 22, column 1) exhibi a good explana o y powe , wi h an adjus ed R-squa ed o 65%, and he independen a iable, RATING_FLI, has a posi i e ela ion wi h he ROA, also s a is ically signi ican , o a con idence le el o 95%. These esul s e idence ha a highe inancial li e acy le el o small business owne s con ibu e o a be e pe o mance o hei i ms, alongside wi h he a he low inancial li e acy le el o en ep eneu s ound a his esea ch, his inc eases he need o inancial educa ion. 47 6. Conclusions This esea ch has wo old objec i e: o assess inancial li e acy le els o small business owne s o he No h o Po ugal and co ela e his esul s wi h he pe o mance o hei i ms. In o de o achie e he i s goal was used a ques ionnai e me hodology, simila ly o he majo wo ks de eloped so a o pe sonal inance issues. Being he ques ionnai e (Appendix A) composed by ou majo a eas: esponden cha ac e is ics; inancial knowledge, inancial beha io and inancial a i udes. The las h ee componen s p o ide om inancial li e acy de ini ion wo ld widely accep ed (A kinson and Messy, 2012). The second goal was achie ed h ough he adap a ion o he ope a ing pe o mance model o Bauwhede (2009). The sample used o assess he inancial li e acy le el sum 103 esponden s, a numbe ha ensu es i s ep esen a i eness, and hey whe e mainly om Po o egion, ollowing he dis ibu ion o i ms ac oss he No h o he coun y. The esul s e idence ha small business owne s end o o e es ima e hei capaci ies, since only 11% admi ed o ha e a a he low le el o inancial li e acy, when he esul s exhibi ed o be ou imes highe in numbe o small business owne s in his si ua ion. Also i showed ha small business owne s ha e he igh a i ude owa ds inancial ma e s, howe e hei inancial beha io does no ollow his end. The lowe inancial li e acy le els a e associa ed wi h i ms wi h null o nega i e ROA, measu e used as a p oxy o i ms’ pe o mance. This esul s eng hened he need o a deepe analyze o he ela ion be ween inancial li e acy le els o small business owne s and hei i ms’ pe o mance. The eg ession o he adap ed model using exhibi s a posi i e co ela ion be ween inancial li e acy a ing and ROA, wi h s a is ical signi icance. This allows o conclude ha a highe inancial li e acy le el o small business owne s con ibu e o a be e pe o mance o hei i ms. And, alongside, wi h he a he low inancial li e acy le el o en ep eneu s ound a his esea ch, his s eng hens he needs o inancial educa ion o his speci ic public. 48 The majo con ibu es o he p esen esea ch a e he imp o emen s a e alua ion me hodology in assess he inancial li e acy le els among small business owne s; s udy o he i s ime he ela ion be ween inancial li e acy le els and i ms’ pe o mance, and, conside ing he e idence o a posi i e ela ion be ween his wo a iables, awa e o he needs o adequa e inancial educa ion o small business owne s on he expec a ion o imp o ing hei pe o mance as business leade s. Wi h an adequa e p og am o inancial educa ion is expec ed an imp o emen o inancial li e acy le els, a educ ion o he isk o small business owne s expe ience inancial di icul ies due con ollable ac o s, like excessi e deb , and minimize he numbe o small business owne s ha a e me e employees o hei companies o become business leade s. 49 Bibliog aphy A kinson, A., and Messy, F.-A. (2011). Assessing Financial Li e acy in 12 Coun ies: An OECD/INFE In e na ional Pilo Exe cise. Jou nal o Pension Economics and Finance, 10(4), 657-665. A kinson, A., and Messy, F. (2012). Measu ing Financial Li e acy: OECD Publishing. A kinson, A., and Messy, F.-A. (2011). Assessing Financial Li e acy in 12 Coun ies: An OECD/INFE In e na ional Pilo Exe cise. Jou nal o Pension Economics and Finance, 10(4), 657-665. A kinson, A., and Messy, F. (2012). Measu ing Financial Li e acy: OECD Publishing. Banco de Po ugal 2010. Rela ó io do Inqué i o à Li e acia Financei a da População Po uguesa. Banco de Po ugal (2014). Análise Sec o ial das Sociedades não Financei as em Po ugal 2009-2014. Banco de Po ugal – Online S a is ics: h p://www.bpo ugal.p /Es a is icasWeb/(S(u3 b3 55zjxy0x45qahsul45))/De a ul .aspx Bauwhede, H. V. (2009). On he ela ion be ween co po a e go e nance compliance and ope a ing pe o mance. Accoun ing & Business Resea ch (Wol e s Kluwe UK), 39(5), 497-513. Beal, D. J., and Delpachi a, S. B. (2003). FINANCIAL LITERACY AMONG AUSTRALIAN UNIVERSITY STUDENTS. Economic Pape s, 22(1), 65-78. B own, R. B., Saunde s, M. N. K., and Be es o d, R. (2006). You owe i o you sel : The inancially li e a e manage . Accoun ing Fo um, 30(2), 179-191. doi: 10.1016/j.acc o .2006.03.001 Coch an, W. G. 1963. Sampling Techniques, 2nd Ed., New Yo k: Jonh Wiley and Sons, Inc. 56 Financial Beha io & Financial A i udes 20. On a scale o 1 o 5, whe e 1 is no hing impo an and 5 e y impo an , he p epa a ion o a business plan a he beginning o he ac i i y is? 21. Was he business plan made a beginning o you ac i i y? 22. Facing he need o an in es men , do you conside impo an he business plan upda e (o elabo a ion)? 23. Do you know how o make a cash low o ecas ? 24. In you company, how o en i is p epa ed a cash low o ecas ? 1 No hing impo an 2 3 4 5 Ve y impo an Yes No 1 No hing impo an 2 3 4 5 Ve y impo an Yes No Ne e Once a yea A leas e e y six mon hs A leas e e y single mon h 57 25. Do you conside impo an he pe iodic analysis o company's p o i abili y, in o de o minimize cos s and maximize p o i s? 26. How o en do you i ? 27. I you ha e a bank loan, do you moni o i s c edi condi ions and compa e hem wi h exis ing al e na i es? 28. I you ha e a bank loan, do you enego ia es i s c edi condi ions? 1 No hing impo an 2 3 4 5 Ve y impo an Ne e Once a yea A leas e e y six mon hs No Yes, whene e I ha e di icul y in paying some esponsibili y Yes, once a yea Yes, a leas e e y six mon hs No Yes, whene e I ha e di icul y in paying some esponsibili y Yes, once a yea Yes, a leas e e y six mon hs A leas e e y single mon h 58 (Ve são Po uguesa) Ca ac e ís icas dos En e is ados 1. Nome 2. N.I.F. – Núme o de Iden i icação Fiscal (da emp esa) 3. Géne o 4. Idade 5. Ní el de Escola idade 6. Tem alguma o mação especí ica na á ea inancei a? 7. Se sim, po a o desc e a o ipo de o mação. Masculino F eminino Ensino P imá io Ensino Ob iga ó io – 9º ano Ensino Secundá io – 12º ano Licencia u a Mes ado ou g au supe io Sim Não 59 8. É o(a) esponsá el pela á ea inancei a da emp esa? 9. Se não, em quem con ia a ges ão da á ea inancei a da sua emp esa? 10. Numa escala de 1 a 5, em que 1 é mau e 5 mui o bom, qual conside a se o seu g au de li e acia inancei a? (Li e acia Financei a é a combinação de consciência, conhecimen o, habilidade, a i ude e compo amen o necessá ios pa a oma decisões inancei as sólidas e alcança o bem-es a inancei o indi idual.) Conhecimen o Financei o 11. Imagine que em de espe a um ano pa a ob e o eembolso de IVA no mon an e de 5.000€. Daqui a um ano se á capaz de comp a : Sim Não Con abilis a Subcon a a Ou o 1 Mau 2 3 4 5 Mui o Bom Mais O mesmo mon an e Menos do que pode ia comp a hoje Não sei Depa amen o Financei o 60 12. Suponha que coloca 100€ numa con a poupança com uma axa de ju o ga an ida de 2% ao ano. Não az nenhum aumen o de capi al nes a con a e ambém não p ocede a qualque esga e. Quan o é que de e á e na con a ao im de um ano? 13. E quan o é que de e ia de es a na con a poupança ao im de 5 anos? Se ia: 14. Ele ada in lação signi ica que o cus o de ida es á a aumen a apidamen e? 15. No malmen e é possí el eduzi o isco de in es i no me cado de ações a a és da comp a de uma ampla gama de ações. 16. Uma emp esa em mais dinhei o hoje quando: [Respos a Abe a] Mais de €110 Exac amen e €110 Menos de €110 É impossí el sabe a pa i das in o mações dadas Não sei Ve dadei o Falso Não sei Ve dadei o Falso Não sei Os clien es pagam mais cedo O luc o aumen a A con a de clien es aumen a Os esul ados ansi ados aumen am Não sei 61 17. O EBITDA é uma impo an e e amen a pa a as emp esas po que: 18. Qual a melho desc ição da in o mação o necida no Balanço? 19. Qual a demons ação inancei a que mos a de o ma mais p ecisa se uma emp esa se ap esen ou en á el num de e minado pe íodo de empo? Rep esen a o luxo de caixa li e Ao luc o é-lhe sub aído impos os e dep eciações pa a ob e uma imagem e dadei a do negócio É um indicado de luxo de caixa ope acional u u o É a p incipal medida de luc o an es de ju os e edução da dí ida Não sei Uma lis a do que a emp esa possui e do que de e Flu uações dos a i os ao longo de um de e minado pe íodo de empo Núme o de emp egados que a emp esa em Todas as acima Não sei Demons ação de Fluxo de Caixa Balanço Demons ação de Resul ados Mapa de O igem e Aplicação de Fundos Não sei 62 A i udes e Compo amen os Financei os 20. Numa escala de 1 a 5, em que 1 é nada impo an e e 5 mui o impo an e, a elabo ação do plano de negócios no início da a i idade é? 21. Foi ealizado um plano de negócios no início da a i idade? 22. Pe an e a necessidade de ealiza um in es imen o, conside a impo an e a a ualização (ou a elabo ação) do plano de negócios? 23. Sabe como se elabo a um mapa p e isional de luxo de caixa? 1 Nada impo an e 2 3 4 5 Mui o impo an e Sim Não 1 Nada impo an e 2 3 4 5 Mui o impo an e Sim Não 63 24. Com que equência elabo a na sua emp esa o mapa p e isional de luxo de caixa? 25. Conside a impo an e a análise pe iódica da e olução da en abilidade da sua emp esa, po o ma a minimiza cus os e maximiza p o ei os? 26. Com que equência o az? 27. No caso de eco e a c édi o bancá io, acompanha as suas condições e compa a-as com as al e na i as exis en es? Nunca Uma ez po ano Pelo menos semes almen e 1 Nada impo an e 2 3 4 5 Mui o impo an e Nunca Uma ez po ano Pelo menos semes almen e Não Sim, semp e que possuo di iculdades em paga alguma esponsabilidade Sim, uma ez po ano Sim, pelo menos semes almen e Pelo menos mensalmen e Pelo menos mensalmen e 64 28. No caso de eco e a c édi o bancá io, enegoceia as suas condições? Não Sim, semp e que possuo di iculdades em paga alguma esponsabilidade Sim, uma ez po ano Sim, pelo menos semes almen e