Exploring the influence of the usage and adequate application of financial services on firm performance: Evidence from Malaysian SMEs

The usage of financial services is fundamental for the financial operation of SMEs. Prior studies have typified a range of financial services used by SMEs. However, evidence is inconclusive about the precise practices behind the usage of financial services and their influence on SMEs performance. This project conducted an empirical study among 129 SMEs located in Sabah, Malaysia, to examine the impact of the usage of financial services on performance. Primary data from survey questionnaire were combined with secondary data from the official databases of SSM Malaysia and analysed using structural equation modelling. Results indicate that lending financial services and non-lending financial services have a positive influence on the financial performance of selected SMEs. This relationship is mediated by the adequate usage of lending and non-lending financial services. Results suggest that the appropriate manner of putting financial services into the operation of SMEs positively affects SMEs efficiency, which is attributable to the theoretical pertinence of the constructs and the qualifications of participants. This article contributes with novel behavioural variables of financial administration, and the demonstration that those practices have a measurable impact on efficiency. The innovative integration of primary and secondary data derived into the general scale FPScore, which contributes with an integral and objective approach for measuring the performance of SMEs. The empirical variables and general scale serve as a point of reference for continuing empirical research in the field SMEs financial management.