Impact of Financial Management Practices and Financial Literacy on Micro, Small and Medium Enterprises (MSMEs) Growth (Case Study at Restaurants in Dili, Timor-Leste)

  • Aderito Lino Monteiro Master of Business Administration, Graduate School, Dili Institute of Technology, Dili Timor-Leste
  • Teresa Freitas Belo Master of Business Administration, Graduate School, Dili Institute of Technology, Dili Timor-Leste
  • Alvaro Menezes Amaral Master of Business Administration, Graduate School, Dili Institute of Technology, Dili Timor-Leste
Keywords: Financial management practices, financial knowledge, financial attitude, financial behavior


The objective of this study is to assess the effects of financial management practices, including accounting information systems, working capital management, capital structure, and capital budgeting, as well as financial literacy, such as financial knowledge, attitude, and behavior on the growth of restaurants in Dili. This study utilized a quantitative approach, with a sample of 70 restaurant managers or owners in Dili. The collecting data methods used questionnaire that distributed to manager or restaurants’ owners in Dili. The data analysis method used multiple regressions with hypothesis test used t and f statistics. The result showed that the financial management practices (accounting information system, working capital management, capital budgeting) and financial literacy (financial knowledge, financial attitude, financial behavior) have positive and significant impact on the restaurants growth in Dili. This suggests that implementing good financial management practices and improving financial literacy can enhance a restaurant's growth. However, capital structure was found to have no impact on restaurant growth in Dili. Further research is recommended to explore other variables that may influence the growth of MSMEs in Timor-Leste and to expand the sample size.


Download data is not yet available.


Aamir, S., & Iqbal, J. (2019). Impact of capital budgeting decisions on financial performance of Small and Medium Enterprises (SME’s): A case study of SME’s of Jammu and Kashmir. International Journal of Advanced Scientific Research and Management, 4(5), 25–29.

Abanis, T., Sunday, A., Eliabu, B., & Burani, A. (2013). Financial Management Practices In Small And Medium Enterprises in Selected Districts In Western Uganda. Research Journal of Finance and Accounting, 4(2), 2222–2847.

Abeywardhana, D. K. Y. (2016). Impact of Capital Structure on Firm Performance: Evidence from Manufacturing Sector SMEs in UK. SSRN Electronic Journal.

Abiodun, A. E., & Entenbang, H. (2016). Financial Literacy and SME Firm Performance. International Journal of Research Studies in Management, 5(1), 31–43.

Abor, J., 2007. Capital structure and financing of Smes: empirical evidence from Ghana and South Africa (Doctoral dissertation, Stellenbosch: Stellenbosch University).

Achtenhagen, L., Naldi, L., & Melin, L. (2010). “Business Growth”—Do Practitioners and Scholars Really Talk About the Same Thing? Entrepreneurship Theory and Practice, 46, 289–316.

Adomako, S., Danso, A., & Ofori Damoah, J. (2016). The moderating influence of financial literacy on the relationship between access to finance and firm growth in Ghana. Venture Capital, 18(1), 43–61.

Agbemava, E., Ahiase, G., Sedzro, E., Adade, T. C., & Bediako, A. K. (2016). Assessing the Effects of Sound Financial Statement Preparation on the Growth of Small and Medium-Scale Enterprises. International Journal of Business and Management, 8(7), 22–30.

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), 1–14.

Ahmad, M. A., & Al-Shbiel, S. O. (2019). The Effect of Accounting Information System on Organizational Performance in Jordanian Industrial SMEs: The Mediating Role of Knowledge Management. International Journal of Business and Social Science, 10(3), 99–104.

Akgün, A. İ., & Karatas, A. M. (2020). Investigating the Relationship between Working Capital Management and Business Performance: evidence from the 2008 financial crisis of EU-28. International Journal of Managerial Finance, 1743–9132.

Belo, T. F. (2019). The Relevance of Microcredit and its Impact on East Timor MSEs and Poverty Reduction. In Instituto De Investigação e Formação Avançada. Evora.

Bismark, O., Kofi, A. F., Kofi, O. A., & Eric, H. (2018). Impact of Financial Management Practices on the Growth of Small and Medium Scale Enterprises in Ghana : The Case of Birim Central Municipality. International Journal of Innovation and Research in Educational Sciences, 5(2), 177–184.

Butt, B. Z., Hunjra, A. I., & Kashif-Ur-Rehman. (2010). Financial Management Practices and Their Impact on Organizational Performance. World Applied Sciences Journal, 9(9), 997–1002.

Chepngetich, P. (2016). Effect of Financial Literacy and Performance SMEs. Evidence from Kenya. 5(11), 26–35.

Clark, R., Lusardi, A., & Mitchell, O. S. (2015). Financial Knowledge and 401(k) Investment Performance: A case Study. Journal of Pension Economics and Finance, 1–24.

Czarnitzki, D., & Hottenrott, H. (2011). R&D investment and financing constraints of small and medium-sized firms. Small Business Economics, 36(1), 65–83.

Davis, E. P., & Weber, J. A. (1990). Patterns and Obstacles to Financial Management. Journal of Financial Counseling and Planning, 1, 41–52.

Dobbs, M., & Hamilton, R. T. (2007). Small Business Growth: Recent Evidence and New Directions. International Journal of Entrepreneurial Behaviour and Research, 13(5), 296–322.

Esmeray, A. (2016). The Impact of Accounting Information Systems on Firm Performance: Empirical Evidence in Turkish Small and Medium Sized Enterprises. International Review of Management and Marketing, 6(2), 233–236.

Ghozali, I., 2018. Multivariate Analysis Application with IBM SPSS Program. 25. Semarang: Diponegoro University Publishing Agency.

Hung, A., Parker, A. M., & Yoong, J. (2009). Defining and Measuring Financial Literacy. In SSRN Electronic Journal.

Hunjra, A.I., Niazi, G.S.K., Akbar, S.W. and Rehman, K.U., 2011. Application of finance techniques: an empirical analysis of pakistani corporate sector. Actual Problems of Economics, (9), p.394.

Hussain, J., Salia, S., & Karim, A. (2018). Is Knowledge that Powerful? Financial Literacy and Access to Finance An analysis of enterprises in the UK. Journal of Small Business and Enterprise Development.

Ismail, N. A. (2009). Factors Influencing AIS Effectiveness Among Manufacturing SMEs: Evidence From Malaysia. The Electronic Journal of Information Systems in Developing Countries, 38(10), 1–19.

Ismail, N. A., & King, M. (2005). Firm Performance and AIS Alignment in Malaysian SMEs. International Journal of Accounting Information Systems, 6, 241–259.

Jennifer, K., & Dennis, O. (2015). Financial Management Practices on growth of Small and Medium Enterprises: A case of Manufacturing Enterprises in Nairobi County. IOSR Journal of Business and Management (IOSR-JBM), 17(8), 65–77.

Karadag, H. (2015). Financial Management Challenges In Small And Medium-Sized Enterprises: A Strategic Management Approach. EMAJ: Emerging Markets Journal, 5(1), 26–40.

Kimiti, A. H. (2020). An Assessment Of The Impact Of Financial Management Practices On Growth Of Smes. Mzumbe University.

Kirumbi, S., 2019. The Impact Of Financial Literacy On The Performance Of Small And Medium Scale Enterprises A Study Of Smes In Morogoro Municipal (Doctoral dissertation, Mzumbe University).

Kitonga, K. G. (2013). The Relationship Between Financial Management Practices anf Financial Performance in The Shipping Industry in Kenya.

Kusi, S., Mahama, H., & Nsowah, J. (2016). Working Capital Management Practices Among Selected Small and Medium Scale Enterprises ( SMEs ) in the Kumasi Metropolis. Stu International Journal of Technology, 1(1), 129–148.

Kuusela, H., Koivumäki, S., & Yrjölä, M. (2020). M&As get another assist: when CEOs add intuition to the decision mix. Journal of Business Strategy, 41(3), 57–65.

Lusardi, A., & Mitchell, O. S. (2007). Financial Literacy and Retirement Prepared-ness: Evidence and Implications for Financial Education. Business Economics, 35–44.

Lusardi, A., & Mitchell, O. S. (2013). The Economic Importance of Financial Literacy. In National Bureau of Economic Research (No. 18952).

Lusardi, A., & Mitchell, O. S. (2014). The Economic Importance of Financial Literacy: Theory and Evidence. Journal of Economic Literature, 52(1), 5–44.

Mazzarol, T., Reboud, S., & Clark, D. (2015). The Financial Management Practices of Small to Medium Enterprises. Annual SEAANZ Conference Proceedings, 1–22.

Menike, L. (2018). Effect of Financial Literacy on Firm Performance of Small and Medium Enterprises in Sri Lanka. Financial Markets & Corporate Governance Conference., 1–25.

Mohamud, I. A., & Mohamed, A. (2016). The Impact of Financial Management Practices on Growth of Small and Medium Enterprise in MOGADISHU. East Asian Journal of Business Economics, 4(3), 25–30.

Moore, D. (2003). Survey of Financial Literacy in Survey of Financial Literacy in Washington State: Knowledge, Behavior, Attitudes, and Experiences. In Social and Economic Sciences Research Center.

Mouna, A., Jianmu, Y., Hazrati, S. A., & Al, H. (2017). The Impact of Capital Structure Change on firm’s Performance in Romania. International Journal of Application or Innovation in Engineering & Management (IJAIEM), 6(10), 11–16.

Muneer, S., Ahmad, R. A., & Ali, A. (2017). Impact of Financial Management Practices on SMEs Profitability with Moderating Role of Agency Cost. Information Management and Business Review, 9(1), 23–30.

Musah, A., Gakpetor, E. D., & Pomaa, P. (2018). Financial Management Practices, Firm Growth and Profitability of Small and Medium Scale Enterprises (SMEs) Alhassan. Information Management and Business Review, 10(3), 25–37.

Nenu, E.A., Vintilă, G. and Gherghina, Ş.C., 2018. The impact of capital structure on risk and firm performance: Empirical evidence for the Bucharest Stock Exchange listed companies. International Journal of Financial Studies, 6(2), p.41.

Nkundabanyanga, S. K., Akankunda, B., Nalukenge, I., & Tusiime, I. (2014). The Impact of Financial Management Practices and Competitive Advantage on the Loan Performance of MFIs. International Journal of Social Economics, 44(1), 114–131.

Nthenge, D. M., & Ringera, J. (2017). Effect Of Financial Management Practices on Financial Performance of Small and Medium Enterprises in Kiambu Town, Kenya. American Based Research Journal, 6(1), 6–32.

Ojera, P. (2018). Indigenous Financial Management Practices in Africa: A guide for Educators and Practitioners. Advanced Series in Management, 20, 71–96.

Okello, C. B., G., Mpeera Ntayi, J., Munene, J. C., & Akol Malinga, C. (2017). The Relationship Between Access to Finance and Growth of SMEs in Developing Economies: Financial Literacy as a Moderator. Review of International Business and Strategy, 1–22.

Olawale, F., & Garwe, D. (2010). Obstacles to the Growth of New SMEs in South Africa: A Principal Component Analysis Approach. African Journal of Business Management, 4(5), 729–738.

Paramasivan, C., & Subramanian, T. (2009). Financial Management. New Age International (P) Ltd.
Phillips, B. D., & Kirchhoff, B. A. (1989). Formation, Growth and Survival; Small Firm Dynamics in the U.S. Economy. Small Business Economics, 1(1), 65–74.

Potrich, A. C. G., Vieira, K. M., & Mendes-Da-Silva, W. (2016). Development of a Financial Literacy Model for University Students. Management Research Review, 39(3), 1–5.

Rajna, A., Ezat, W. S., Junid, S. Al, & Moshir, H. (2011). Financial Management Attitude and Practice among the Medical Practitioners in Public and Private Medical Service in Malaysia. International Journal of Business and Management, 6(8), 105–113.

Razen, M., Huber, J., Hueber, L., Kirchler, M., & Stefan, M. (2020). Financial Literacy, Economic Preferences, and Adolescents’ Field Behavior. Finance Research Letters, August, 101728.

Robb, C. A. (2014). The Personal Financial Knowledge Conundrum. Journal of Financial Service Professionals, 69–72.

Shih, T. Y., & Ke, S. C. (2013). Determinates of Financial Behavior: Insights into Consumer Money Attitudes and Financial Literacy. Service Business, 1–32.

Simerly, R. L., & Li, M. (2000). Environmental Dynamism, Capital Structure and Performance: A theoretical integration and an empirical test. Strategic Management Journal, 21(1), 31–49.

Singh, C., & Wasdani, K. P. (2016). Finance for Micro, Small, and Medium-Sized Enterprises in India: Sources and Challenges. In SSRN Electronic Journal.

Soares, A. da C., Moeljadi, Rohman, F., & Solimun. (2014). Effect of Entrepreneurial Orientation on Business Performance Moderated by Government Policy (Study On SMEs In Timor Leste ). International Journal of Business and Management Invention, 3(8), 64–71.

Strömbäck, C., Lind, T., Skagerlund, K., Västfjäll, D., & Tinghög, G. (2017). Does Self-Control Predict Financial Behavior and Financial Well-Being? Journal of Behavioral and Experimental Finance, 1–19.

Sucuahi, W. T. (2013). Determinants of Financial Literacy of Micro Entrepreneurs in Davao City. International Journal of Accounting Research, 1(1), 44–51.

Susan, M. (2020). Financial Literacy and Growth of Micro, Small, and Medium Enterprises in West Java, Indonesia. International Symposia in Economic Theory and Econometric, 27, 39–48.

Tang, N., Baker, A., & Peter, P. C. (2015). Investigating the Disconnect between Financial Knowledge and Behavior: The Role of Parental Influence and Psychological Characteristics in Responsible Financial Behaviors among Young Adults. Journal of Consumer Affairs, 376–406.

Tuffour, J. K., Amoako, A. A., & Amartey, E. O. (2020). Assessing the Effect of Financial Literacy Among Managers on the Performance of Small-Scale Enterprises. 1–18.

Turyahebwa, A., Sunday, A., & Ssekajugo, D. (2013). Financial management practices and business performance of small and medium enterprises in western Uganda. African Journal of Business Management, 7(38), 3875–3885.

Vieira, E. F. S. (2012). What do We Know About Financial Literacy? A Literature Review. Marmara Journal of European Studies, 20(2), 23–28.

Yogendrarajah, Kengatharan, & Suganya, J. (2017). Financial Management Practices and Performance of SMEs in Sri Lanka : Evidence from Jaffna District. International Journal of Accounting & Business Finance, 1(1), 61–72.

Zietlow, J., Hainkin, J. A., & Seinder, A. (2007). Financial Management for Nonprofit Organizations. John Wiley & Sons.
How to Cite
Monteiro, A., Belo, T. and Amaral, A. (2023) “Impact of Financial Management Practices and Financial Literacy on Micro, Small and Medium Enterprises (MSMEs) Growth (Case Study at Restaurants in Dili, Timor-Leste)”, Timor Leste Journal of Business and Management, 5, pp. 64-72. doi: 10.51703/bm.v5i0.141.