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

Purpose Financial management is dened as the overall arrangement for planning, directing, monitoring, organizing, and controlling of the economic resources of an organization, with a view to ecient accomplishment of the enterprise objectives. It is well recognized that nancial management practice has a key reason for the success of those enterprises and it is the main issue for any business type. However, the status of effective nancial 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 nancial management practice of micro and small enterprises in East Gojjam Zone. Method The type of research applied in this study is explanatory/causal/ in nature. Questionnaires were used to collect primary data. The combination of purposive stratied and systematic sampling techniques were applied to select respondents. A multiple linear regression model was used to test the casual relationship between the study variables. Findings The ndings indicated that nancial management knowledge, nancial management attitude, size of enterprise, locus of control, and use of information technology have positive and signicant effect on nancial management practice. However, gender, owner’s age, and enterprise age have no statistically signicant effect on nancial management practice of micro and small enterprises. The


Introduction
Financial management practice is a global issue that increases the pro tability of any business type and it is the key instrument for success of any Business. Sound nancial management practice has a great contribution for micro and small enterprises all over the world. It improves the performance of any business. Financial management knowledge becomes an increasingly valuable skill for any decision making practice in the 21 st century economy. Financial management is important for any institutional success whereas ineffective nancial management, combined with other factors in an organization can often lead to severe problems (Lakew & Rao, 2012). Micro and small businesses are the driving force for the growth and development of the economies of many countries in the world including Ethiopia. It is also noted in various literatures that such contribution of the small scale enterprises to the economy become realistic only with effective nancial management practice (Derbie & Kassahun, 2013). Lack of adequate nancial management skill of owners / managers is one of the major reason behind poor nancial management practice of micro and small business enterprises (Jindrichovska, 2013).
Regardless of their level of development, micro and small business enterprises has signi cant contribution towards the economic development of all countries around the world (Abanis et al., 2013). In the world, small, medium and micro enterprises play a great role in absorbing labor, penetrating new markets and generally enhancing an enabling environment for entrepreneurship. This is partly due to the fact that small, medium and micro enterprises tend to be more labor-intensive and therefore have a higher labor-absorption capacity than big businesses (Jacqui & Macquet, 2002). For instance, in the United States of America, small businesses introduce innovative products and services, created jobs, opened foreign markets and in the process sparked the US economy. In Japan, small businesses account for the bulk of the country's established businesses that provide sustainable jobs. In Taiwan, micro and small businesses enterprises account for 98% of the gross domestic product (Landzani, 2004). In Africa, in order to improve the economic conditions and poverty issue, small businesses can play a greater role as the driving force of economic growth and poverty reduction (Okpara, 2011). Any strategy for poverty alleviation in Africa must include support, encouragement and promotion of MSEs. For example, in South Africa, 90% of new job employment were created by small, medium and micro-business enterprises between 1985 and 2005 (Cohen, 2012). In Ethiopia, micro and small enterprise sector has a great importance particularly for the low-income, poor and women groups which is evident from their relatively large presence, share in employment and small capital requirement. These are su cient reason for governments and other stakeholders in development to be interested in micro and small enterprises. Micro and small business enterprises are considered as the major means of providing employment, alleviating poverty, ensuring food security, and private sector development around the globe. However, in the context of many developing countries and countries in transition, particular in Ethiopia, MSEs are also seen as an emerging private sector, forming the basis for private-sector-led growth (Gebrehiwot & Wolday, 2001). More speci cally as per Amhara region, East Gojjam Zone, Ethiopia, MSEs o ce report (2019), Micro and Small enterprises have a great signi cance economic contribution by creating a job opportunity and creation of wealth for more than 47,482 owners without including employees and other participants in ve sectors including manufacturing, construction, service, trade and urban agriculture. Therefore, this indicates that Micro and Small businesses have signi cance contribution for the development of the economy and hence they have to exercise better nancial management practice by identifying key determinants. The contribution of MSE for economic development is highly depending on the success of MSE. To make micro and small business enterprises more successful, a manager should acquire a wide range of small business management skills including more importantly nancial management skill (Urban & Naidoo, 2012). However, Prior studies on the management of small and medium industries advocate that even management functions such as planning, organizing, sta ng, directing, and controlling are not done properly in many of such industries. That is why many small and medium industries nancial management practice is very poor. Lack of adequate nancial management knowledge skill and experience of managers, failure in selection of the staff on the basis of their micro and small business management skill, non-dedication of responsibilities to members, insu cient commitment of managers and lack of access to information, failure in proper processing of information, and so on are the major reasons for these barriers (Asil & Naralan, 2016). MSEs are also poorly managed due to the lack of management skills among owners or managers. They lack awareness of the importance of adopting business best practices and quality management systems, such as nancial management and customer focused activities, in order to increase the rms' productivity and pro tability. As a result of the above mentioned problems, MSEs are unable to compete effectively in the market (Radam, Abu and Abdullah, 2008). Further, many micro and small enterprise owners fail because they are unable to understand basic nancial concepts or practices. Even in developed countries, entrepreneurs have not su cient nancial management skill, an issue which is obvious in the small business and enterprise world. It's widely recognized that throughout the globe, micro and small businesses have a high rate of failure. In the U.S Small Business Administration had noted that fty percent (50%) of small businesses fail in the rst year and ninety-ve percent (95%) fail within the rst ve years (European Federation of Accountants, 2004). A research conducted by Harif et al. (2010) with regard to the nancial management practices of MSEs in Malaysia indicated that lack of working capital which accounted for 93.6 per cent is the most common weakness in the area of nancial management practice. The issue of nancial management in developing countries is not so much satisfactory. Especially in Ethiopia, nancial management practice is at very severe level. This is because most business enterprises have not appointed nancial managers to be in charge of nancial management of the enterprise. Usually, the owners or general managers act as the assistance of the accountant control nancial matters of the enterprise. On the other hand, most owners/managers have no formal training in management skills, especially nancial management. In addition, the concepts of nancial management have also only been recognized in Ethiopia since the beginning of the 1960s, when the commercial code was introduced by the then imperial government. Hence, nancial management is still one of the challenges of business enterprises in Ethiopia (Deresse and Rao, 2012). Additionally, in Ethiopia, the owners of small businesses have no adequate nancial management skills and training, most small businesses do not engage in nancial planning, analysis, and control; do not set short and long term nancial objectives; do not analyze the trend in sales, cost and pro t ( Solomon, 2017). Further, lack of awareness and knowledge, lack of follow up and inability to maintain quali ed accountants are also the major factors that hinder to adopt best nancial management practice. Therefore, the main objective of the study was to investigate determinants of nancial management practice of micro and small enterprises in East Gojjam Zone, Ethiopia.

Literature Review
Determinants of Financial Management Practice and Hypothesis Formulation

Financial Management Knowledge
Financial management knowledge is the capability to use relevant knowledge and understanding to planning, organizing, directing and controlling or managing the nancial activities of an enterprise or e cient utilization of resources (Lusardi and Mitchell, 2007). Eagly&Chaiken (1993) indicated that nancial knowledge is a factor that has an impact on nancial management practice. Further, Thi et al. (2015) in his research indicated that nancial knowledge has a signi cant positive effect on nancial management behavior because nancial knowledge based education will increase insight about nancial management behavior. Therefore, in this study, it was hypothesized that: H1: Financial management knowledge has signi cant effect on nancial management practice.

Financial Management Attitude
Financial management attitude is de ned as a state of mind, opinion and judgment of a person about nancial management (Jodi & Phyllis, 1998) . Further, as per Parrotta and Johnson (1998), nancial attitude can be considered as the psychological tendency expressed when evaluating recommended nancial management practices with some degree of agreement or disagreement. Financial attitudes in uence the way people spend, save and waste money (Furnham, 1984). On the same case, Godwin (1994) when tested the impact of nancial attitudes on nancial management by setting attitudes as an independent variable, found that a positive attitude toward planning was the greatest predictor of cash ow management. Joo and Grable (2004) nd that, people with stronger perceptions and positive nancial attitudes tend to more successful in nancial management practice. Contrarily, Rejina et al. (2011) states that nancial attitude has a signi cant negative effect on nancial management which implies that a person with good nancial management attitude may have bad nancial management practice. Thus, in this study, based on ndings from majority of past studies, it was hypothesized that: H2: Financial attitude has signi cant effect on nancial management practice.

Locus of Control
According to Hellrigel et al. (2010) locus of control is de ned as the extent to which individuals believe that they can control events which affect them. Thiet al. (2015) on his study indicated that locus of control has a signi cant negative effect on nancial management behavior. By contrast, Listiani (2017) found that the better locus of control a person has, the better becomes pattern of nancial management behavior and it implies that locus of control has signi cant positive effect on nancial management behavior. Therefore, in this study, it was hypothesized that: H3: Locus of control has signi cant effect on nancial management practice

Use of Information Technology
Use of Information Technology is de ned as usage of tools and machines to solve real world problems (Gupta, 2008). It refers to a variety of computerized technologies that enables communication and the electronic transmission of information (Ashra and Murtaza, 2008). These technologies include desktop computers, laptops, hand-held devices, wired or wireless connectivity, business productivity software, data storage & security, network security, other related protocols, etc. ICT has the ability to enhance the effective utilization of nancial management practices. According to Bharadwaj (2000) the use of technology at rm level reckoned to have positive impact on rm practices. According to Berisha (2009), the use of information technology by MSEs can bene t them by developing competences for managing, reduce the transaction costs and develop capability to gather information. Buhimila and Dong (2018) asserted that there is a signi cant relationship between the use of technology and rm nancial management practices. Adoption and actual use of more sophisticated information technology in developing countries would have a cunningly better way of MSEs sound nancial management practices and performance (McChlery et al., 2005). In addition, the inability of small rms to make use of computerized accounting systems also act as a barrier to the successful implementation of sound nancial management practices (Agyei-Mensah, 2011). Therefore, in this study, it was hypothesized that: H4: Usage information technology has signi cant effect on nancial management practice 2.5. Size of Enterprise According to Pandey (2012) enterprise size can be expressed in a number of ways such as amount of capital invested, number of employees, the technology used in the operation and its market coverage or size of enterprise refers to employees per establishment, employees per company, sales per rm and value added per rm or total assets of the enterprise (SBA, 2014). The size of MSE affects the competitiveness of the rm as well as the operation of the enterprise. The larger the enterprise size, they acquire better resources, economies of scale, able to have advanced equipment's, knowledgeable employees, and others. In the opposite, the smaller the Enterprise size, limited access to capital, low number of employees, has no that much advanced technology and so on. Rathnasiri (2015) study determined that there is statistically signi cant differences between the category of small and medium scale enterprises in adopting accounting, cash management practices and xed asset management practices. Everaert et al. (2006) indicated that the need to prepare a complete set of nancial statements increases as an entity progresses from small to medium size. It is at the medium-size stage that nancial performance reporting will be useful to internal and external users. Therefore, the hypothesis is formulated as: H5: Enterprise size has signi cant effect on nancial management practice 2.6. Age of Enterprise Age of enterprise is de ned as the number of years of the establishment of the business. Wambui, Kimani, & Muhavani (n.d) on their study indicated that institutional age and effectiveness of nancial management practice are positively and signi cantly associated but Rathnasiri (2015) concluded that the number of years that business has been in operation under existing management is not a signi cant variable for varying adoption of nancial management. Thus, the hypothesis is formulated as: H6: Enterprise age has signi cant effect on nancial management practice.

Age of the Owner
Age of owners refers to the number of years the owner have starting from born. Elizabeth et al. (1998) in their study indicated that owner's age has signi cant positive effect on nancial management practice. They indicated that the older the participant, the better becomes nancial management practices adopted. By contrast, Asandimitra and Kautsar(2017) indicated in their study that age has negative signi cant impact on the success of MSEs management by women entrepreneurs which implies that the younger women entrepreneurs, the more success in managing the MSEs. Thus, the hypothesis is formulated as: H7: Owner's age has signi cant effect on nancial management practice 2.8. Gender Gender is de ned as range of characteristics given to human beings as male and female. A study done by Fatimah et al. (2013) indicated that there is signi cant relationship between gender and nancial management practices.
The result implies that males are better nancial managers than the female practitioners. On the other hand Hira et al. (1992) andparrota &Johnson (1998) found that no relationship between gender and nancial management. This means that gender has no in uence on nancial management practice of SMEs. Thus, based on the ndings from majority of previous works, in this study it was hypothesized that: H8: Gender has signi cant effect on nancial management practice.

Conceptual Framework
A conceptual framework is a research tool intended to assist a researcher to develop awareness and understanding of the situation under review. It shows the interaction of dependent and independent variables. The independent variables are those factors (Financial management knowledge, nancial attitude, locus of control, Enterprise size, Enterprise age, use of information technology (computer), owner's age and gender whereas the dependent variable is nancial management practice.

Research Design
The research design used in this study was explanatory because explanatory research aims at establishing the cause and effect relationship between variables.
There are 27,989 micro and small enterprises in the selected six weredas (DebreMarkos, Sinan, Motta, Bichena, Gozzamn, and Debre Elias) in the year 2019. The total population from each selected woredas with respect to their business sectors is presented as follows: The study was used a combination of strati ed sampling method (strati cation based on type of business they were engaged i.e. manufacturing, construction, service, trade and urban agriculture), systematic sampling technique (used to select respondents from each stratum's) and purposive (to select six woredas from 20 woredas of East Gojjam Zone). The selected six woredas include: DebreMarkos, Sinan, Motta, Bichena, Gozzamn, and Debre Elias. This woredas were selected because of the existence of large number of MSEs as compared to others in the Zone.

Sample Size Determination
The researcher found sample size (n) from the total population at 95% con dence level by using Yemane (1967) sample size determination formula.
To calculate and determine the sample from each stratum, the researchers were used proportional allocation i.e. sample size in stratum one is equal to total sample size divided by the total population and multiplied by the total population of the speci c stratum (Crawford, 1990).Therefore, the researcher was determined a sample size from each stratum as follows: The study was used only primary sources of data and the primary data was collected through open and close ended questionnaires from micro and small enterprise owners/managers of East Gojjam Zone. The items in the questionnaire were mainly adopted from previous empirical studies with some modi cations (Addo, 2017;Marris, 2005 andRejna et al., 2011). In order to improve its reliability, the questionnaire was converted from English version to Amharic version and then distributed those questionnaires to respondents.

Method of Data Analysis
After data was collected from primary data sources through close and open ended questionnaires, in order to examine the effect of explanatory variables on nancial management practice, the data have been analyzed by using multiple linear Regressions analysis and STATA version 13 was used as a data analysis tool. This is because multiple regression analysis is useful in determining whether or not a particular effect is present, in measuring the magnitude of a particular effect and in forecasting what would be of a particular effect (McCartney et. al., 2006). To analyze Likert scale questionnaires, rst of all, it is necessary to calculate a composite score (sum or mean) from four or more Likert items and then the study used parametric statistic such as mean for central tendency, standard deviation for variance and regression (Boone and Boone, 2012

De nition and Measurement of Variables Included in the Model
Financial management practice refers to the systems of e cient and effective management of resources in such a manner as to accomplish the objectives of the organization (Chung & Chuang, 2010). Financial management practice is measured using Likert scale (1-not practiced to 5-very highly practiced) and then to convert it in to continuous variable, mean value of all likert scale items were calculated.
Financial management knowledge is the capability to use relevant knowledge and understanding to planning, organizing, directing and controlling or managing the nancial activities of an enterprise like e cient utilization of resources (Lusardi and Mitchell, 2007). Financial management knowledge is measured using Likert scale (1strongly disagree to 5-strongly agree).
Financial management Attitude is de ned as a state of mind, opinion and judgment of a person about nancial management (Jodi & Phyllis, 1998) and measured by using Likert scale (1-strongly disagree to 5-strongly agree).
Locus of Control is de ned as the extent to which individuals believe that they can control events which affect them (Hellrigel et al, 2010) and measured using Likert scale (1-strongly disagree to 5-strongly agree).
Use of Information Technology is de ned as usage of tools and machines to solve real world problems (Gupta, 2008) measured using Likert scale (1-strongly disagree to 5-strongly agree) Size of Enterprise refers to employees per establishment, employees per company, sales per rm and value added per rm or total assets of the enterprise (SBA, 2014) and measured by Logarithm of total assets.
Gender is de ned as range of characteristics given to human beings as male and female (dummy variable or Nominal scale 0 for male and 1 for female) Age of Enterprise refers to the number of years of the establishment of the business enterprise measured in number of years in operation (continuous variable).
Age of owners refers to the number of years the owner have starting from born and measured by Nominal scale (1 for 18 to 30 years, 2 for 31 to 45 years, 3 for 46 to 65 years and 4 for above 65 years).

Diagnostic Tests
The primary assumptions reviewed in this study include normality, homoscedasticity, multicollinearity, and model speci cation test. When assumptions are violated accuracy and inferences from the analysis are affected (Antonakis& Dietz, 2011). Accordingly, the study was tested the following assumptions:

Normality Test
The assumption of normality can be tested in different ways such as histogram, kdensity (kernel density estimate), normal p-plot, Q-plot, skewness and kurtosis. But, PP-plots are more exacting methods to spot deviations from normality, and are relatively easy to interpret as departures from a straight line (Keith, 2006). Therefore; the researcher was checked normality of residuals by normal PP-plots and as indicated from gure 2, the data is normally distributed.

Multicollinearity Test
The data must not show multicollinearity, which occurs when there exist two or more independent variables that are highly correlated with each other. The researcher was checked this assumption in STATA through an inspection of correlation coe cients or Tolerance/variance in ation factor (VIF) values. As a rule of thumb, multicollinearity problem exists if the VIF of a variable exceeds or equal to 10 (Hair et al., 2010). Therefore, as indicated from the value of variance in ation factor (VIF), there is no multicollinearity problem.

Heteroscedasticity Test
The assumption of homoscedasticity refers to equal variance of errors across all levels of the independent variables (Osborne & Waters, 2002). However, it is good to note that the regression is fairly robust to violation of this assumption (Keith, 2006). Therefore, in order to solve this problem the researcher was applied robust regression.

Model Speci cation Test (Omitted Variable Test)
The STATA output indicated that there is no omitted variable (model speci cation error) since Ramsey test indicates p-value of 0.2389 which is above 0.05. Therefore, the model is speci ed correctly.  The goodness t of the model is tested using R square. The value of R-square statistics of the model was 60.52%.
This value indicated that 60.52% of variation in the dependent variable (FMP) is described by the independent (explanatory) variables and the other 39.48% was explained by other factors which are not involved in this model. Moreover, F value of 0.000 indicates that it is signi cant supporting the model pertinent to the study. indicates that an increase (decrease) in nancial management knowledge of owners/managers results an increase (decrease) in the nancial management practice of micro and small enterprises. This implies that lack of nancial management knowledge combined with uncertainty of the business environment often leads MSEs to face serious problems regarding nancial and overall performances, which can even threaten the survival of the enterprise (Alpkan & Kaya, 2012). This result is consistent with Thiet al. (2015) which indicated that nancial knowledge has positive and signi cant effect on nancial management practice because the role of education with related to nancial knowledge will increase insight about nancial management practice and an increase in nancial knowledge would lead an increase in performance of nancial management practice. In addition, Joo (2009, as cited in Nyaga, 2016 stated that effective nancial management skills should improve nancial well-being in a positive way and failure to manage nances well can lead to long term negative social consequences.

Financial Management Attitude
Financial management attitude has a positive and statistically signi cant in uence on nancial management practice with a positive coe cient of .2477823 and signi cant at 1% level of signi cance (p-value = 0.000). The result indicates that an increase (decrease) in nancial management attitude of owners/managers results an increase (decrease) in the nancial management practice of micro and small enterprises. Meaning that the more individuals able to apply a good nancial attitude, it also has a good effect on the management of business nance. That means a more positive in nancial attitude; the more becomes their nancial management practice.
This is due to the quality of the nancial attitude derived from the quality of good education of a person and able to apply in everyday life (Listianis, 2017, as cited in Prihartono andAsandimitra, 2018). The nding implies that people with stronger perceptions and positive nancial attitudes becomes more successful in their nancial management practice (Joo and Grable, 2004). Therefore, individuals express different beliefs about nancial management but according to this study and other previous researcher's owners/managers having strong nancial attitude leads to good nancial management practice. This fact is supported by furnham (1984) who stated that nancial attitude shape the way people spend, save, and waste money.

Locus of Control
Locus of control has a positive and statistically signi cant in uence on nancial management practice with a positive coe cient of .10182 and signi cant at 5% level of signi cance (p-value=0.011). The result indicates that an increase (decrease) in locus of control results an increase (decrease) in the nancial management practice of micro and small enterprises. This result is in line with Listiani (2017) which stated that the better locus of control a person have, the better becomes their pattern of nancial management behavior or in other words his nding implies that locus of control has a signi cant positive effect on nancial management behavior. By contrast, this result is not in line with Thi et al (2015) which indicated that locus of control has a signi cant negative effect on nancial management behavior or someone with good locus of control tends not to apply good nancial management practice.

Use of Information Technology
Use of information technology has a positive and statistically signi cant in uence on nancial management practice with a positive coe cient of .0810066 and signi cant at 5% level of (p-value = 0.037). The result indicates that an increase (decrease) in use of information technology results an increase (decrease) in the nancial management practice of micro and small enterprises. This implies that the better micro and small enterprises will use information technologies; the better becomes effective their nancial management practice. This result is consistent with Buhimila and Dong (2018) and Agyei-Mensah (2011) which stated that the availability of affordable computers and suitable software has played an important role in promoting the practice of sound nancial management. In addition, McChlery et al. (2005) also identi ed that the use of computerized accounting system as a major factor in promoting sound nancial management.

Enterprise Size
Size of enterprise is used as a factor of nancial management practice and measured by the logarithms of total assets. Size of enterprise has a positive and statistically signi cant in uence on nancial management practice with a positive coe cient of .1713805 and at 1% level of signi cance (p-value=0.001). The result indicated that an increase (decrease) in size of enterprises in the aspect of assets results an increase (decrease) in the nancial management practice of micro and small enterprises. The result is in line with previous empirical studies which revealed that the need to nancial management practice increases as an entity progresses from small to medium size which implies that enterprise size has positive in uence on nancial management practice (Everaert et al., 2006 andRathnasiri, 2015).

Conclusion And Recommendation
The regression result indicted that nancial management knowledge, nancial management attitude and size of enterprise have statistically signi cant in uence on nancial management practice at 1% level of signi cance (p-value=0.001). On the other hand, locus of control and use of information technology have statistically signi cant in uence on nancial management practice at 5% signi cance level since the p values for the two variables were 0.011 and 0.037 respectively. However, gender, owner's age, and enterprise age were not statistically signi cant effect on nancial management practice (p-value=0.563, 0.296 and 0.424 respectively). Based on the above result the researcher recommends that nancial management training is important to improve nancial management knowledge and hence nancial management practice of owners/managers. Therefore, the government should continuously provide nancial management training for micro and small enterprise owners/managers. In addition, using information technology is very important for effective nancial management practice. Information technologies (computers) are used to easily record transactions; to prepare, analysis and report nancial statement to users, and store relevant information for long period of time. Therefore, owners/managers of micro and small enterprises should use information technologies to improve their nancial management practice. Reading makes human beings good viewers for things and knowledge can be improved through reading. Therefore, owners/manager of micro and small enterprises should improve their nancial management knowledge by reading different nancial management texts or by acquiring formal/informal educations from different educational institutions.

Limitations and Directions for Future Researchers
The limitation of this study is the usage of only primary data. Therefore, future researchers should considered this limitation and it is better to conduct a research on the same title by adding new variables like level of education, experience of the owners/managers, rules and regulations and also by including secondary data. It is also advisable to conduct a research on the same title in households, banks, universities and other public organizations in Ethiopia.