Parents’ Motivation and Experience on Business Performance: The Mediating Effect of Financial Literacy Among SMEs in Sumatera, Indonesia

Abstract

Business performance is an achievement as the result achieved by individuals work and a company. In the years between 2012 and 2014 the Enterprise Survey (2015) has conducted a financial survey of Indonesian private sector/micro which experienced negative real annual sale growth (-0.5%), while the average in lower- middle-income economies was 0.6%. Small firms (5-19 employees) had the worst performance. The owners of SMEs should manage their financial business effectively to achieve good business performances. Low level of financial literacy causes bad effect on business performances. This paper aims to analyze the influence of parents’ motivation and experience on SME’s business performance with financial literacy as the mediating variable. Questionnaire survey has been distributed among SMEs owners in Sumatera, Indonesia. From 387 respondents as the sample of this study, the result shows that parents’ motivation does affect the financial literacy. Nevertheless, parents’ financial experience has no effect on SME’s owners’ financial literacy. Besides, parents’ motivation and experience affect the business performance. However, financial literacy does not mediate the relationship between parents’ motivation and parent’s experience towards business performance.