Development and validation of psychometric scale to measure financial intelligence of entrepreneurs of Kerala a multidimensional analysis

Abstract

Entrepreneurship is increasingly recognized as a viable solution to unemployment, particularly in states like Kerala, which faces high levels of joblessness. Entrepreneurs require financial intelligence—the ability to make informed financial decisions—as improper financial management is a primary reason for business failures. Despite its importance, no comprehensive scale exists to measure the financial intelligence of entrepreneurs. This study addresses that gap by developing and validating a multidimensional scale to measure the financial intelligence of small entrepreneurs in Kerala, with seven identified dimensions: financial attitude, financial literacy, financial behaviour, financial management, financial decision-making, financial discipline, and financial locus of control. The study employed a rigorous methodology beginning with literature review, focus group discussions, and expert consultations to identify relevant dimensions and subdimensions. Data were collected through cluster sampling across all districts of Kerala, using BNI networks, resulting in 854 valid responses. Exploratory and Confirmatory Factor Analysis were performed to test the reliability and validity of the scale. Findings revealed strong interconnections among the dimensions, with financial attitude, financial literacy, financial behaviour, and financial discipline significantly influencing financial management, financial decision-making, and financial locus of control. Regression analysis highlighted financial discipline and financial literacy as strong predictors across multiple dimensions. Partial mediation effects were found in relationships involving financial management, financial decision-making, and financial locus of control. Demographic analysis revealed that younger, unmarried, and more experienced entrepreneurs, as well as those with commerce backgrounds and higher education, demonstrated higher levels of financial intelligence. While gender, residence, and business type showed variations, they were not strong predictive factors. The study concludes that the financial intelligence of entrepreneurs in Kerala is generally moderate, underscoring the need for training and awareness programs. The validated scale not only contributes to theory by providing a comprehensive measurement tool but also holds practical value for training, curriculum development, and policymaking. It can serve as a model for developing similar instruments in other geographical locations, thereby enhancing entrepreneurship development and supporting economic growth