Financial Literacy of Managers and Its Effect on Strategic HR Decisions and Firm Performance in Pakistan’s Corporate Sector

Abstract

Financial literacy has been turning out to be an important managerial skill that impacts decision-making, organizational development, and competitiveness. Managers in the corporate world of Pakistan are likely to face strategic human resource (HR) decisions to be made during the recruitment process, training investment, compensation planning, and talent management. Nevertheless, inadequate financial literacy can limit their capability to match the HR strategies with financial objectives of the organization. This paper examines the association of managerial financial literacy, strategic HR decision-making, and performance of a firm within the corporate environment in Pakistan. Based on the available literature, organizational reports, and empirical research, the research establishes the role of financial knowledge of managers in HR planning processes, the allocation of resources, and the performance reviews. The evidence indicates that managers who are more financially literate make more evidence-based HR decisions, which lead to a high level of productivity, resource use efficiency, and positive financial performance of organizations. The analysis reveals the necessity of organised financial trainings and inclusion of financial skills in HR leadership training schemes throughout the corporate industry in Pakistan