Preferences for ethical intermediaries and sustainable investment decisions in micro-firms: The role of financial literacy and digital financial capability

This study analyses the effects of financial literacy and digital financial capabilities in shaping entrepreneurs' preferences for ethical financial intermediaries and sustainable investment decisions. Exploiting novel survey data on Italian micro-enterprises, we find that more financially literate business owners have higher preferences for intermediaries with a strong ethical stance, are more likely to make investments inspired by environmental and social criteria and have a higher awareness of sustainable financial products. Moreover, digital financial competencies are found to play a significant role in enhancing preferences for ethical intermediaries and sustainable investment decisions. Finally, we show that the beneficial effect of financial literacy is mostly direct, while the indirect effect operating through higher digital financial abilities, despite being statistically significant, impacts firms' sustainable financing and investing decisions only to a lower extent.