Do Entrepreneurs’ Financial Literacy Moderate the Effect of Financing Decisions on the Growth Prospects of Micro, Small and Medium-Scale Enterprises in Northeastern Nigeria?

This paper explores the moderating influence of entrepreneurs’ financial literacy on the relationship between financing decisions and growth prospects. The research sampled 176 micro, small and medium enterprises (MSMEs) in Northeastern Nigeria from 2018 to 2023. The data was generated from the financial statements of these organisations and through the administration of a questionnaire and analysed using ordinary least square regression (OLS). The research outcome suggests that long-term financing options have a significant positive effect on growth, while short-term financing loans may constrain growth prospects. The moderation analysis reveals that entrepreneurs’ financial literacy moderates the impact of long-term debt on growth, supporting the upper-echelon theory. The findings indicate that MSMEs can achieve sustainable growth by employing entrepreneurs with financial expertise to manage financing decisions for sustainable growth. The research outcome may guide managers in selecting the appropriate financing sources to boost firm value for optimum growth.