Risk Taking by Entrepreneurs

Hugo A. Hopenhayn and Galina Vereshchagina ()

No 500, RCER Working Papers from University of Rochester - Center for Economic Research (RCER)

Abstract: Entrepreneurs bear substantial risk, but empirical evidence shows no sign of a positive premium. This paper develops a theory of endogenous entrepreneurial risk taking that explains why self-financed entrepreneurs may find it optimal to invest into risky projects offering no risk premium. The model has also a number of implications for firm dynamics supported by empirical evidence, such as a positive correlation between survival, size, and firm age.

Keywords: occupational choice; risk taking; firm dynamics; borrowing constraints. (search for similar items in EconPapers)
JEL-codes: E21 D92 L25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent, nep-mic and nep-rmg
Date: 2003-04
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Persistent link: http://EconPapers.repec.org/RePEc:roc:rocher:500

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