FINANCIAL LITERACY, RISK TOLERANCE, AND ENTREPRENEURIAL INTENTION AMONG BS BUSINESS GRADUATES IN PAKISTAN: THE MEDIATING ROLE OF RISK TOLERANCE
Abstract
This study investigates the financial literacy, risk tolerance and entrepreneurial intention relationship between already investigated variables that is financial literacy and entrepreneurial intention among BS business students of Pakistan by taking risk tolerance as a mediator. Entrepreneurship is an important channel of participation in the economy, especially given the current high unemployment rate among the young, and the scarcity of formal sector employment. The study used a quantitative method, cross sectional survey with a sample of 387 graduates of various universities in Pakistan who were selected using multi-stage cluster sampling. The scales used to collect the data were validated scales of measurement of financial literacy, risk tolerance and entrepreneurial intention, and the demographic data collected were age, gender, family business background and exposure to entrepreneurship courses. Analytical methods were descriptive statistics, Confirmatory Factor Analysis (CFA) to determine the reliability and validity, Partial Least Squares Structural Equation Modeling (PLS-SEM) for structural relationships and mediation analysis with bootstrapping method with 5000 iterations. The results show that financial literacy has a positive effect on entrepreneurial intention with its role mediator between risk tolerance. This relationship is partly mediated by risk tolerance (32%) and the mediation effect is stronger for graduates who have experienced a family business. There were non-statistically significant differences between gender. The results suggest that there are two pathways of cognitive-emotional relationship between financial literacy and psychological readiness and these pathways can simultaneously impact entrepreneurial intention. The study highlights the importance of financial education and its integration into the higher education programs, the need for an experiential approach and the need for financial risk management training in universities, and the necessity of financial knowledge and psychological readiness policies. This research not only helps in understanding the mechanism of graduate entrepreneurship in Pakistan but also provides some practical suggestions to educational institutions, policymakers and entrepreneurs.
Keywords: Financial Literacy, Risk Tolerance, Entrepreneurial Intention, Unemployment, Cognitive-Emotional, Psychological Readiness.
