“Entrepreneurs on their financial literacy: evidence from the Netherlands”

by Yan Alperovych, Riccardo Calcagno, Martijn Lentz ; CeRP WP N. 203/20

Using a representative survey of Dutch entrepreneurs and self-employed we measure their subjective financial knowledge, whether they ask for advice when managing their companies, and whether subjective financial knowledge and demand for advice are related to the firm economic outcomes. We find that respondents feel more comfortable when dealing with accounting subjects than with strategic
ones, in which they feel they know the least. Firms owned by entrepreneurs with higher financial knowledge are more likely to show a higher gross margin and higher revenue growth. Entrepreneurs who report higher financial knowledge are less likely to seek advice and to delegate the financial decisions concerning their firm to someone else. Seeking professional advice does not increase the likelihood that the company shows better performance if the entrepreneur’s degree of financial knowledge is lower than the average. Our results suggest that entrepreneurs’ subjective financial knowledge is an important factor for their business success.

Published: June 2020