Abstract
Purpose
The purpose of this paper is to examine the relationship between financial literacy and entrepreneurial activities, and the moderating effects of industrial regulation in the relationship between financial literacy and entrepreneurship.
Design/methodology/approach
In this study, the role of financial literacy on entrepreneurial participation and performance is investigated through multi-sourced data from the Chinese Family Panel Studies with manually merged provincial and industrial data from 2014. Four hypotheses are tested based on Probit and Tobit models. Moreover, instrumental variable method and principal component analysis are applied to provide robustness checks.
Findings
The empirical results demonstrate that financial literacy has significantly positive effects on entrepreneurial participation, as well as on entrepreneurial performance. In addition, industrial regulation positively moderates the effects of financial literacy on entrepreneurial participation and performance, which indicates that financial literacy plays a more important role in promoting entrepreneurship in tightly regulated industries.
Originality/value
This study proposes and tests the effects of financial literacy on entrepreneurial activities, which fills an important gap in the literature. The results in this paper provide evidence that financial literacy has positive impacts in both the entry and operation stages of entrepreneurship. This evidence provides theoretical foundations for policy making in popularizing financial knowledge and supporting entrepreneurial activities. Moreover, this research further reveals the effects of industrial regulation in the context of China, suggesting that the government should be more effective in promoting administrative decentralization and reducing unnecessary interventions.
Subject
Management Science and Operations Research,General Business, Management and Accounting
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