Effect of Financial Bahaviour on the Performance of Small and Medium Enterprises in Damaturu Metropolis, Yobe State, Nigeria

Abstract

Owners and managers of small and medium enterprises (SMEs) face various financial decisions when operating their businesses on a daily basis and sometimes they find it difficult to make informed decision as a result of insufficient knowledge about financial matters. Lack of financial literacy is the major obstacle to the performance of SMEs. This study examined the effect of financial behaviour on the performance of SMEs in Damaturu Metropolis, Yobe State, Nigeria. The study was anchored on resource-based theory. The population of the study was 335 SMEs registered under the Yobe State Small and Medium Scale Industry Credit Board, and a Simple Random Sampling Technique was used to select 173 respondents using the sample size table by Krejcie and Morgan (1970). Data collected was analysed using descriptive statistics, while the Structural Equation Model (SEM) was used for Inferential Statistics to test the relationship between the variables of the model using Smart-PLS version 3. The research findings show that there is a significant positive relationship between financial behaviour and SMEs’ performance. Hence, the findings of the study suggest that financial behaviour improves the performance of SME owners and managers. The study recommends that programs and workshops be organized by the government to educate SMEs owners and managers on the importance of financial literacy, among SMEs owners and managers.