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A. Molina-García 1, M.J. Martínez-Romero 2, R. Martínez-Alonso 2, J. Diéguez-Soto 1

1Universidad de Málaga (SPAIN)
2Universidad de Almería (SPAIN)
Financial literacy (hereafter, FL) has raised significant interest in recent decades due to the increased complexity of financial markets. However, there is no consensus on the concept of FL. A broad definition is provided by OECD (2018, p.4): ‘A combination of awareness, knowledge, skill, attitude and behaviour necessary to make sound financial decisions and ultimately achieve individual financial wellbeing’. Previous literature has analysed FL at both individual and business levels. While from an individual level, FL has been shown to affect investment and financing decisions, from a business level, FL has been demonstrated to impact on financial, strategic and performance issues. In this context, there is an interesting emerging research avenue that tries to combine the abovementioned trends by analysing the individual’s level of FL within a business context from the lens of entrepreneurship.

Within the literature that analyses the FL-entrepreneurship relationship, certain studies have shown that FL has an impact on the probability of becoming an entrepreneur (Oggero et al., 2020). However, prior research has obviated the previous but fundamental step, i.e. the relationship between FL and entrepreneurial intention. This relationship is very important as entrepreneurial intention is a required antecedent for becoming an entrepreneur.

Therefore, improving entrepreneurial intention from FL, when individuals are attending their university studies, could allow to enhance their entrepreneurial character. The FL-entrepreneurial intention relationship should be analysed within undergraduate students, as the university is considered to be the starting point for many individuals to become entrepreneurs. In this regard, and to the best of the authors’ knowledge, there are not studies focused on such link.

Moreover, the propensity to take risks has been one of the determining variables when analysing the phenomenon of entrepreneurship. It is often claimed that entrepreneurs are risk-neutral or even risk-loving compared to non-entrepreneurs, with these risk preferences being crucial for an individual to become an entrepreneur (Caliendo et al., 2009). There is also evidence that individuals' risk preferences might be influenced by FL (Riepe et al., 2020).

Based on the abovementioned reasoning, the present study analyses the mediating role of risk-taking propensity in the FL-entrepreneurial intention relationship. By using a sample of 600 undergraduate students from three different universities in Spain, this study analyses the above relationship by using structural equation modelling and controlling for endogeneity. The preliminary findings reveal the positive direct effect of FL on entrepreneurial intention, and the positive indirect effect through the risk-taking propensity. These findings have relevant implications for, among others, job creation.

[1] Caliendo, M., et al. (2009). Risk attitudes of nascent entrepreneurs-new evidence from an experimentally validated survey. Small Business Economics, 32(2), 153–167.
[2] OECD (2009). OECD/INFE Toolkit for Measuring Financial Literacy and Financial Inclusion. 2018.
[3] Oggero, N., et al. (2020). Entrepreneurial spirits in women and men. The role of financial literacy and digital skills. Small Bus. Econ., 55(2), 313–327.
[4] Riepe, J., et al. (2020). Financial literacy and entrepreneurial risk aversion. J. Small Bus. Manag.