Finance, financial literacy and small firm financial growth in Bangladesh: the effectiveness of government support

Abstract

Although firm growth is an old issue, very limited number of studies have found on the issues of small firm growth. Studies in many countries have focused on some specific growth factors and no comprehensive research on this issue is available to draw a conclusion. Based on the concept of the theory of ‘Resource Based View (RBV)’, current study motivated to see how the resources like finance and financial literacy of owner-manager affect financial growth of small firms and the role government support plays in that relationship. Data was collected through questionnaire from 407 owner-managers of small firms. Using partial least squares, the study found that both finance and financial literacy has strong positive relation with small firm financial growth. Astoundingly, the study uncovered that government support does not moderate the relationships between finance, financial literacy and small firm financial growth in the expected way, which the study argues to be a result of the seemingly weakness of the government support distributions. Therefore, policy makers and practitioners should ensure the better access to financial resources of small firms and required financial literacy of owner-managers as well as effective government support for fostering more growth of small firms.