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The Impact of Financial Literacy on Household Entrepreneurial Decision-Making: Evidence from China

Author

Listed:
  • Ling Zhou
  • JunHeng Li
  • Wei Li

Abstract

Our study uses the 2019 China Household Finance Survey (CHFS) dataset to explore how financial literacy impacts household entrepreneurial decisions. This is an important question because financial literacy is increasingly recognized as a critical factor influencing economic behavior and outcomes at the household level. Understanding how financial literacy shapes entrepreneurial decisions can provide valuable insights for policymakers aiming to promote economic growth and reduce inequality. We apply mediation and moderation models, along with instrumental variables, to uncover that higher financial literacy deters entrepreneurship, particularly among males and couples, with a less pronounced effect in urban settings. Education levels mitigate this deterrent effect. Additionally, risk tolerance, financial preferences, and capital availability mediate the link between literacy and entrepreneurial choices.

Suggested Citation

  • Ling Zhou & JunHeng Li & Wei Li, 2025. "The Impact of Financial Literacy on Household Entrepreneurial Decision-Making: Evidence from China," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 17(5), pages 1-65, May.
    • Handle: RePEc:ibn:ijefaa:v:17:y:2025:i:5:p:65
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    References listed on IDEAS

    as
    1. Su, Lanlan & Peng, Yanling & Kong, Rong, 2024. "Financial literacy, farmland mortgage financing, and household entrepreneurship: Empirical evidence from rural China," Journal of Asian Economics, Elsevier, vol. 94(C).
    2. Shulin Xu & Kangqi Jiang, 2024. "Knowledge creates value: the role of financial literacy in entrepreneurial behavior," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-17, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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