Entrepreneurs on their financial literacy: evidence from the Netherlands

Abstract

Using a representative survey of Dutch entrepreneurs and self-employed individuals, (i) we measure their subjective financial knowledge and the extent to which they ask for advice when managing their companies, and (ii) we examine whether subjective financial knowledge and the demand for advice are related to the firm economic performance. We find that the respondents feel more comfortable with accounting subjects than they do with strategic ones, of which they feel that they know the least. Entrepreneurs with a greater extent of financial knowledge are more likely to report a higher gross margin and higher revenue growth for their firm. These entrepreneurs are also less likely to seek advice and to delegate financial decisions. Seeking professional advice does not increase the likelihood of an entrepreneur having better performance. Our results suggest that entrepreneurs’ degree of financial knowledge is related to the success of their businesses, while seeking advice is not significantly correlated with better firm performance.

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