C.E. O Financial literacy and corporate financial performance in Indonesia: Mediating role of sources of investment decisions

Abstract

The present study attempts to examine the impact of C.E. O Financial Literacy on Corporate financial performance of SMEs through mediating role of sources of investment decisions comprising accounting information, advocate information and neutral information. The primary data has been collected from 301 executives of the SMEs in Indonesia. To examine the impact of incorporated variables on the corporate financial performance, Confirmatory factors analysis and Structural equation modeling approach are incorporated in the study, several tests were applied including descriptive analysis, KMO and Bartlett's test, rotated component matrix, convergent and discriminant validity. The direct effects indicated that the financial literacy of C.E. O is the significant and positive drivers of corporate financial performance. While the indirect effects show that all incorporated sources of investment decisions significantly mediated the relationship of C.E. O financial literacy and financial performances. It is indicated that accounting information, neutral information and advocate information acts as a significant mediator between financial literacy of C.E. O and corporate financial performance. Also, the study embraces several theoretical, practical and policy-making implications for the financial management practitioners and strategy developers to attain high levels of financial performance and implement informed financial decisions. In the last, various limitations have been given along with the recommendations for in-depth findings by future researchers.