Abstract:

This study examines the interplay between SME managers’ financial knowledge and institutional quality in shaping firm performance across developing economies, specifically Ghana. Drawing on institutional theory, the study argues that while financial knowledge constitutes a critical internal capability enabling informed financial decision-making to improve performance, its effectiveness depends on the broader institutional environment in which SMEs operate. Using firm-level data, the analysis investigates how specific dimensions of financial knowledge, such as debt, inflation, interest rates, and investment literacy, affect two key performance indicators: profitability and employment growth.

The study applied the Partial Least Squares Equation Modelling (PLS-SEM) to analyse the research data within the framework of the study's conceptual model. The findings reveal heterogeneous effects across performance measures. Debt knowledge is positively associated with profitability, reflecting managers’ ability to structure repayment obligations efficiently and optimise financing decisions. It also facilitates access to growth capital, supporting skilled employment expansion. Inflation knowledge emerges as a significant driver of both profitability and employment growth, suggesting that managers who understand macroeconomic dynamics are better positioned to implement adaptive pricing and staffing strategies. Interest rate knowledge is particularly relevant for skilled employment decisions. However, the results also show that contextual factors matter, while industry and gender do not moderate profitability outcomes, gender moderates the relationship between investment knowledge and skilled employment growth.

Please choose your submission type: Full Paper

Primary Track: Financial Management

Keywords: Entrepreneurial Finance ;Financial Decision Making ;Financial Education ;Financial Literacy ;Financial Strategy

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Dr. Senyo Agbanyo