Entrepreneurship and household portfolio choice: Evidence from the China Household Finance Survey

Rui Li, Tianyu Wang and Mingshan Zhou

Journal of Empirical Finance, 2021, vol. 60, issue C, 1-15

Abstract: The efficient allocation of household assets is important for household wealth and entrepreneurial activities. However, there is scarce evidence on how entrepreneurial activities influence household financial decisions. We use a simple model to characterize the impact of entrepreneurship on household portfolio choice and the two underlying channels—the diversification effect and the risk substitution effect. We also empirically examine the impact of entrepreneurship using data from the 2013, 2015, and 2017 waves of the China Household Finance Survey (CHFS). The empirical results show that entrepreneurship significantly decreases both household risky market participation and risky asset holding. These findings are robust to alternative measurements of key variables, different model specifications, and Lewbel’s two-stage estimators. This study also verifies the co-existence of both the diversification and risk substitution effects. In particular, the net effect of entrepreneurship on household portfolio choice varies between urban and rural areas due to the different offsetting results between the two effects.

Keywords: Entrepreneurship; Household portfolio choice; Risky market participation; Risky asset share; Diversification effect; Risk substitution effect (search for similar items in EconPapers)
JEL-codes: D14 G11 L26 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:60:y:2021:i:c:p:1-15

DOI: 10.1016/j.jempfin.2020.10.005

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