Financial Literacy and Firm Performance: Mediation of Behavioral Financial Bias

Abstract

The purpose is to determine the influence of behavioral financial bias on firm performance and to find out if it is mediated by behavioral financial bias. Design a type of quantitative research with a positivism paradigm and develop research hypotheses related to financial literacy variables, behavioral financial bias, and firm performance variables. The research sample of owners, and general managers because they have adequate knowledge about the performance of the companies they lead is 245 samples. The unit of analysis is SME business actors who are members of the Indonesian Credit Guarantee and the research locations were carried out in DKI Jakarta, Bogor, Depok, Tangerang, and Bekasi. The result is a positive and significant influence of financial literacy on firm performance directly or mediated by financial behavior bias. The findings are novelty research, to improve firm performance by increasing financial literacy in financial knowledge and financial education. Meanwhile, financial behavior can be used to improve firm performance, which can reduce the influence of mental accounting to separate and group financial resources into different mental "accounts" and overconfidence due to the tendency of business actors to have excessive confidence.