Owners’ Financial Capabilities and SME Performance: Analyzing the Channel of Financial Resilience

Abstract

This study is aimed to empirically analyze the effect of owners’ financial capabilities on SME performance in Pakistan. SMEs contribute significantly towards global economy in the form of job creation and income generation. Mediating role of financial resilience and moderating role of financial advice are also investigated. The researcher has followed two theories i.e. theory of planned behavior (TPB) and resource-based view (RBV). The study has followed quantitative research method and positivism research philosophy. The data has been collected from SME owners through structured and adapted questionnaire on respondent demographics as well as on study variables. Target population was SMEs in Pakistan and SME owners were the unit of analysis. Stratified sampling technique has been employed for sample selection and final data included 405 responses. PLS-SEM is applied through SMART PLS-4 and it is concluded that SME owners’ financial capabilities have direct and positive impact on SME performance in Pakistan. It is also concluded that financial resilience mediated the impact of predictor variable on outcome variable. It is also concluded that financial advice is moderating the indirect impact of financial capabilities on SME performance. This study has also provided notable implications for policy makers, SME owners and researchers.