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

Ling Zhou, JunHeng Li and Wei Li

International Journal of Economics and Finance, 2025, vol. 17, issue 5, 65

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.

Date: 2025
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