Financial literacy, value creation and firm performance. An investigation of Italian small and medium enterprises

This article aims to determine the influence of entrepreneurs’ financial literacy for the growth of SMEs’ value. The paper verifies the hypothesis that there is a significant relationship between financial literacy and value creation, as indicated by economic value added (EVA®). The study analyses 162 Italian SMEs operating in the textile and clothing sector. The analysis period is between 2011 and 2013. Regression analysis and correlation analysis have been applied to test the hypotheses. The results suggest a positive and significant relationship between financial literacy and the variables that drive the value creation. Greater financial literacy allows SMEs to optimise their capital structure and select the most profitable projects. This work is useful to stimulate debate on the role of financial education in mitigating the difficulties of small and medium entrepreneurs in achieving value creation goals and in enabling policy makers to identify gaps and design appropriate responses.