Exploring The Impact of Ratio-Based Financial Behavior on the Financial Performance: Evidence from Micro, Small, and Medium Enterprises (MSMEs)

Abstrak

Previous studies have generally used the concept of financial behavior as a determinant of MSME financial performance, but this study employs a different concept, namely financial behavior based on financial ratios. This means that financial behavior is not merely understood as general money management practices but is objectively measured through financial ratio indicators such as: Liquidity Ratio, Debt Ratio, Profitability Ratio. Most studies on MSMEs measure financial variables using respondents’ perceptions, however these approaches have weaknesses, including perceptual bias, social desirability bias, and low objectivity. In contrast, this study uses financial ratio indicators as a proxy for financial behavior. Consequently, the measurement becomes more objective, empirically measurable, and academically robust. The research method used was explanatory quantitative research employing a cross-sectional survey approach with the aim of testing the causal relationship between ratio-based financial behavior and the financial performance of MSMEs receiving microfinance. Overall, this study found that Ratio-Based Financial Behavior is a strategic factor that bridges the gap between access to microfinance and improved financial performance of MSMEs. These findings reinforce the view that the success of MSMEs depends not only on the availability of capital, but also on the business owners’ ability to effectively use financial information to manage, evaluate, and develop their businesses.