“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.
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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
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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
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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).
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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
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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

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(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