Crisis misread: the interplay of governance and financial literacy in Lebanon’s 2019 downfall

Purpose This study aims to investigate the underlying factors that limited Lebanese citizens, despite their financial literacy, from effectively anticipating and responding to the 2019 economic crisis. By examining latent variables, the research explores the interplay between financial literacy and quality of governance in crisis management. Design/methodology/approach The research adopts a quantitative approach using an online survey targeting 258 Lebanese respondents with educational backgrounds in finance, business or economics. Exploratory factor analysis was conducted to identify latent factors influencing individuals’ ability to anticipate and mitigate the crisis’s impact. Findings The study reveals two primary latent factors that significantly influenced consumer behavior: (1) economic and financial literacy and (2) quality of governance. While participants demonstrated reasonable financial literacy levels and recognized early warning signs, their ability to respond effectively was hindered by low-quality governance. Corruption, fiscal mismanagement and a lack of transparent economic data limited consumers' capacity to act on their financial literacy. Research limitations/implications The study’s findings are based on a sample of 258 respondents residing in Beirut, which may limit broader generalizability. Future research should expand the sample size and geographic coverage. Practical implications The research recommends enhancing governance frameworks through judicial independence, digital government platforms and public education campaigns on corruption to improve crisis resilience. Social implications Strengthening public trust in institutions through improved governance can foster greater civic engagement and encourage proactive financial behavior, enhancing societal resilience against economic crises. Originality/value This study contributes to the crisis management literature by demonstrating that financial literacy alone is insufficient for effective crisis mitigation. The findings highlight the critical role of governance in translating financial awareness into meaningful precautionary actions.