Financial Literacy and the Financial Performance of SMEs in Oman: Examining the Mediating Role of Financial Behavior

Humaid Talib Rashid Al Musheifri; Baharudin Kadir; Zaharuzaman Jamaluddin

doi:10.56868/ijmt.v4i1.116

Authors

Humaid Talib Rashid Al Musheifri Faculty of Business & Accountancy, Universiti Selangor (UNISEL), Shah Alam Campus Seksyen 7, 40000 Shah Alam, Selangor, Malaysia
Baharudin Kadir Faculty of Business & Accountancy, Universiti Selangor (UNISEL), Shah Alam Campus Seksyen 7, 40000 Shah Alam, Selangor, Malaysia
Zaharuzaman Jamaluddin Faculty of Business & Accountancy, Universiti Selangor (UNISEL), Shah Alam Campus Seksyen 7, 40000 Shah Alam, Selangor, Malaysia

DOI:

https://doi.org/10.56868/ijmt.v4i1.116

Keywords:

Financial literacy, Financial behavior, Financial knowledge, Financial planning, Financial capability, SME financial performance, Oman

Abstract

Financial literacy is associated with small and medium-sized enterprise (SME) performance, yet limited evidence explains how distinct financial capabilities relate to financial behavior and firm-level outcomes, particularly in Oman. This study examines the relationships among financial knowledge, financial communication, financial abilities, financial planning, financial behavior, and SME financial performance. Using a quantitative cross-sectional design, data were collected from 384 SME decision-makers in Oman and analyzed using partial least squares structural equation modeling (PLS-SEM) with 5,000 bootstrap resamples. All four financial-literacy dimensions were positively and significantly associated with financial behavior and SME financial performance. Financial behavior showed the strongest direct association with performance (β = .343), while financial abilities had the strongest capability-to-performance association (β = .234). Financial planning showed the strongest association with financial behavior (β = .279) and the largest indirect effect through financial behavior (β = .096). Financial behavior significantly mediated all four capability–performance relationships, indicating complementary partial mediation. The model explained 53.5% of the variance in financial behavior and 75.2% in SME financial performance. The findings highlight the importance of treating financial literacy as a multidimensional capability and translating financial capabilities into systematic financial-management practices.

References

Agyapong, D., & Attram, A. B. (2019). Effect of owner-manager’s financial literacy on the performance of SMEs in the Cape Coast Metropolis in Ghana. Journal of Global Entrepreneurship Research, 9(1), 67. https://doi.org/10.1186/s40497-019-0191-1.

Ajzen, I. (1991). The theory of planned behavior. Organizational behavior and human decision processes, 50(2), 179-211. https://doi.org/10.1016/0749-5978(91)90020-T

Al Musheifri, H. T. R., Kadir, B., & Jamaluddin, Z. (2026). Behavioral factors influencing SME financial performance: Financial decision-making, communication, and advisory support in Oman. International Journal of Management Thinking, 3(2), 32–46. https://doi.org/10.56868/ijmt.v3i2.103.

Devender, K., Kafila, Goli, G., & Shravan, M. (2025). Bibliometric trends in SMEs financial literacy research from 2021 to 2024. Future Business Journal, 11(1), 69. https://doi.org/10.1186/s43093-025-00495-w.

Duréndez, A., Dieguez-Soto, J., & Madrid-Guijarro, A. (2023). The influence of CEO’s financial literacy on SMEs technological innovation: the mediating effects of MCS and risk-taking. Financial Innovation, 9(1), 15. https://doi.org/10.1186/s40854-022-00414-w.

Eniola, A. A., & Entebang, H. (2017). SME managers and financial literacy. Global Business Review, 18(3), 559–576. https://doi.org/10.1177/0972150917692063.

Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of marketing research, 18(1), 39-50. https://doi.org/10.1177/002224378101800104

Graña-Alvarez, R., Lopez-Valeiras, E., Gonzalez-Loureiro, M., & Coronado, F. (2024). Financial literacy in SMEs: A systematic literature review and a framework for further inquiry. Journal of Small Business Management, 62(1), 331-380. https://doi.org/10.1080/00472778.2022.2051176.

Hair Jr, J. F., Sarstedt, M., Hopkins, L., & Kuppelwieser, V. G. (2014). Partial least squares structural equation modeling (PLS-SEM). European business review, 26(2), https://doi.org/106. 10.1108/EBR-10-2013-0128.

Hayes, A. F. (2022). Introduction to mediation, moderation, and conditional process analysis: A regression-based approach. Guilford Press.

Henseler, J., Ringle, C. M., & Sarstedt, M. (2015). A new criterion for assessing discriminant validity in variance-based structural equation modeling. Journal of the academy of marketing science, 43(1), 115-135. https://doi.org/10.1007/s11747-014-0403-8.

Huston, S. J. (2010). Measuring financial literacy. Journal of Consumer Affairs, 44(2), 296–316. https://doi.org/10.1111/j.1745-6606.2010.01170.x.

Kaiser, T., Lusardi, A., Menkhoff, L., & Urban, C. (2022). Financial education affects financial knowledge and downstream behaviors. Journal of financial economics, 145(2), 255-272. https://doi.org/10.1016/j.jfineco.2021.09.022.

Lusardi, A., & Mitchell, O. S. (2014). The economic importance of financial literacy: Theory and evidence. Journal of economic literature, 52(1), 5-44. https://doi.org/10.1257/jel.52.1.5.

Molina-García, A., Diéguez-Soto, J., Galache-Laza, M. T., & Campos-Valenzuela, M. (2023). Financial literacy in SMEs: a bibliometric analysis and a systematic literature review of an emerging research field. Review of Managerial Science, 17(3), 787-826. https://doi.org/10.1007/s11846-022-00556-2

OECD. (2018). OECD/INFE core competencies framework on financial literacy for MSMEs. OECD Publishing. https://doi.org/10.1787/220101c9-en

OECD. (2023). Financial literacy and digitalisation for MSMEs in South East Europe. OECD Publishing. https://doi.org/10.1787/b63091ad-en.

Padi, A., Musah, A., Blay, M. W., & Okyere, D. O. (2025). Small and Medium Scale Enterprise (SME) Owner financial literacy, entrepreneurial competencies and financial performance: the role of corporate governance. Future Business Journal, 11(1), 160. https://doi.org/10.1186/s43093-025-00585-9.

Rekha, I. S., Sriram, K. V., & Hungund, S. (2025). MSME/SME financial literacy: A systematic literature review and bibliometric analysis. Journal of the Knowledge Economy, 16(4), 14378–14405. https://doi.org/10.1007/s13132-024-02472-0.

Sajid, M., Mushtaq, R., Murtaza, G., Yahiaoui, D., & Pereira, V. (2024). Financial literacy, confidence and well-being: The mediating role of financial behavior. Journal of Business Research, 182, 114791. https://doi.org/10.1016/j.jbusres.2024.114791.

Wise, S. (2013). The impact of financial literacy on new venture survival. International Journal of Business and Management, 8(23), 30–39. https://doi.org/10.5539/ijbm.v8n23p30.

Zhao, X., Lynch Jr, J. G., & Chen, Q. (2010). Reconsidering Baron and Kenny: Myths and truths about mediation analysis. Journal of consumer research, 37(2), 197-206. https://doi.org/10.1086/651257.