Can financial capability improve entrepreneurial performance? Evidence from rural China

The capability of individuals to manage their finances is essential to the outcomes of their entrepreneurial activities. Using panel data from the China Household Finance Survey (C.H.F.S.) in 2013, 2015 and 2017, this article examines how financial capability affects entrepreneurial performance in rural China. The results demonstrate that financial capability is positively correlated with the scale, profitability and sustainability of entrepreneurship, which is robust in consideration of endogeneity. The effects of financial capability are heterogeneous for different entrepreneurs. Furthermore, technology, labour and land act as the mediating variables through which financial capability improves entrepreneurial performance. Therefore, to facilitate entrepreneurial success, it is important to provide entrepreneurs with financial education. Meanwhile, improvements to the financial environment should also be considered. Additionally, financial institutions should combine financial services with factors, such as technology, land and labour, to improve entrepreneurial performance.