FINANCIAL LITERACY, BEHAVIORAL BIASES, AND WORKING CAPITAL MANAGEMENT: AN INTEGRATED STUDY OF INVESTMENT BEHAVIOR AMONG STUDENTS AND FINANCIAL PERFORMANCE OF MSMES

Abstract

ABSTRACT: Purpose: This study aims to develop an integrated understanding of financial decision-making by examining the role of financial literacy and behavioral factors in shaping investment intentions among students, alongside analyzing the impact of working capital constraints on the operational performance of Micro, Small, and Medium Enterprises (MSMEs). The research seeks to establish financial literacy as a common underlying determinant influencing both individual investment behavior and enterprise-level financial efficiency. Design/Methodology/Approach: The study adopts a mixed-method research design combining quantitative and qualitative approaches. Primary data are collected through structured questionnaires administered to senior secondary and undergraduate students (n ≈ 300) and MSME owners (n ≈ 200) from selected regions. Additionally, in-depth interviews are conducted with MSME stakeholders to capture qualitative insights. Statistical tools such as descriptive analysis, correlation, and regression models are employed to examine relationships between financial literacy, behavioral factors (peer influence, risk perception, social media exposure), working capital components (receivables, inventory, credit access), and financial outcomes. Findings: The findings are expected to demonstrate that financial literacy significantly influences both students’ investment intentions and MSMEs’ financial management efficiency. Among students, behavioral biases and social influences moderate the relationship between financial literacy and actual market participation, often leading to suboptimal investment decisions. In the MSME context, inadequate financial literacy, coupled with structural constraints such as limited access to formal credit and delayed receivables, adversely affects operational performance. While firms adopt adaptive strategies such as informal financing and supplier credit, these remain short-term solutions and do not address systemic inefficiencies. Practical Implications: The study highlights the need for integrated financial education frameworks that combine cognitive financial knowledge with behavioral training. For policymakers, the research suggests designing targeted interventions that enhance financial literacy at both the individual and enterprise levels. For MSMEs, improving access to institutional credit and promoting digital financial platforms can strengthen working capital management. Educational institutions should incorporate practical financial training to foster informed investment behavior among students. Overall, the study provides actionable insights for building financially resilient individuals and sustainable business ecosystems. Keywords: Financial Literacy; Behavioral Finance; Investment Intention; Share Market Participation; MSMEs; Working Capital Management; Financial Decision-Making; Risk Perception; Access to Finance; Youth Investors