Financial Knowledge, Financial Planning, and Entrepreneurial Risk Attitudes: Evidence from Small and Medium Enterprises in Ekiti State

Abstract

Although financial capability has been recognized as a crucial source of information for financial decision-making, little study has been done on how it influences SMEs' risk-taking attitudes. This study investigated the nexus between financial knowledge, financial planning, and entrepreneurial risk attitudes among SMEs in Ekiti State, Nigeria. The study used a descriptive survey design with double sampling, which included single-stage cluster and convenience sampling. A structured questionnaire was used in the study to collect information from 287 participants. In the data analysis, descriptive statistics and multinomial logistics regression technique were used. The study therefore confirmed a positive and statistically significant effect of financial knowledge and financial planning on entrepreneurial risk attitudes in Ekiti State, Nigeria. Findings from the study have obviously shown the significance of financial knowledge, and financial planning on SMEs’ entrepreneurial risk attitudes. If implemented, the study's conclusions will result in advanced planning and knowledge of financial instruments like loans, derivatives, insurance, etc., which will encourage SMEs to take reasonable risks. Therefore, legislators, regulators, and other company operators may find the study's findings helpful in implementing simplicity in financial transactions that will favorably influence SMEs' decision-making, which may be influenced by their degree of risk aversion. SMEs' owners should, however, keep improving their financial planning skills in order to further refine.