Financial Behavior and SMEs Performance: The Mediating Influence of Financial Literacy and Organizational Culture

Trapped in a recurring cycle marked by limited access to quality financial education re-sources and an underestimation of the importance of a positive organizational culture, nu-merous SMEs find it challenging to acquire the necessary knowledge for making well-informed financial decisions, ultimately impeding their overall performance. This study in-vestigates the mediating influence of financial knowledge and organizational culture on fi-nancial behaviour and SME performance. A purposive sampling technique was utilized to select 650 SMEs operating for the past five years and registered with SMEDAN in Lagos State. Data were collected through a structured questionnaire, and analysis employed Path Analysis-Structured Equation Modelling (PA-SEM). Results indicate a significant associa-tion between financial behaviour, financial literacy, and SME performance. Moreover, there is a noteworthy relationship between financial behaviour, organizational culture, and SME performance. The study establishes that financial literacy and organizational culture partially mediate the link between financial behaviour and SME performance. Consequently, it is recommended that SMEs should align financial education initiatives, cultural endeavours, and financial practices with long-term business objectives, fostering an environment condu-cive to continuous improvement and success.