Determinants of Financial Management Practice: The Case of Micro and Small Enterprises in East Gojjam Zone, Ethiopia

Abstract

Gedefaw Asres, Beza Muche

Financial management is the overall arrangement for planning, directing, monitoring, organizing, and controlling of the eco- nomic resources of an organization, with a view to efficient accomplishment of the enterprise objectives. It is well recognized that financial management practice has a key reason for the success of those enterprises and it is the main issue for any busi- ness type. However, the status of effective financial management practice in developing countries especially in Ethiopia is at its infant stage. Thus, the main objective of the study is to investigate the determinants of financial management practice of micro and small enterprises in East Gojjam Zone.

The type of research applied in this study is explanatory/causal/ in nature. Questionnaires were used to collect primary data. The combination of purposive stratified and systematic sampling techniques were applied to select respondents. A multiple lin- ear regression model was used to test the casual relationship between the study variables. The findings indicated that financial management knowledge, financial management attitude, size of enterprise, locus of control, and use of information technology have positive and significant effect on financial management practice. However, gender, owner’s age, and enterprise age have no statistically significant effect on financial management practice of micro and small enterprises. The descriptive analysis indicated that there is poor financial management practice of micro and small enterprises in East Gojjam Zone. The study suggested that financial management experts should provide financial management training for micro and small enterprise owners/managers.

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