Abstract: Using the data of China Household Finance Survey (CHFS) in 2015, this paper examines the impact of financial knowledge on household entrepreneurial activities that use their own real estate for production and management. The study finds that financial knowledge can significantly promote households using their own real estate for entrepreneurship. Knowledge of inflation and cognition of investment risk can significantly promote the entrepreneurial participation by family-owned real estate, while knowledge of interest rate has a negative impact on it, but this effect is not significant. Financial knowledge has a more positive impact on families in rural areas, with low level of education and wealth. The probability of entrepreneurial activities with family-owned real estate in the eastern region is significantly lower than that in the central region, and the probability in the western region is also lower than that in the central region, but the coefficient is not significant. The further mechanism test finds that financial knowledge can promote household wealth accumulation and ease the restraint of liquidity constraints on entrepreneurship. Improving financial knowledge can enhance family risk preference, thereby reducing the inhibition of traditional risk aversion awareness on entrepreneurship. In the current situation that SMEs are generally facing the difficulty of financing, the improvement of human capital brought by financial knowledge can greatly increase the possibility that households obtain loans from formal financial institutions, thereby reducing the realization of entrepreneurial talent by credit constraints.

Key words: financial literacy, entrepreneurial decision-making by self-owned real estate, household asset allocation, mental accounting