Stock Market Wealth and Entrepreneurship

Gabriel Chodorow-Reich, Plamen T. Nenov, Vitor Santos and Alp Simsek

No 32643, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use data on stock portfolios of Norwegian households to show that stock market wealth increases entrepreneurship by relaxing financial constraints. Our research design isolates idiosyncratic variation in household-level stock market returns. An increase in stock market wealth increases the propensity to start a firm, with the response concentrated in households with moderate levels of financial wealth, for whom a 20 percent increase in wealth due to a positive stock return increases the likelihood to start a firm by about 20%, and in years when the aggregate stock market return in Norway is high. We develop a method to study the effect of wealth on firm outcomes that corrects for the bias introduced by selection into entrepreneurship. Higher wealth causally increases firm profitability, an indication that it relaxes would-be entrepreneurs’ financial constraints. Consistent with this interpretation, the pass-through from stock wealth into equity in the new firm is one-for-one.

JEL-codes: E22 E44 G50 L26 (search for similar items in EconPapers)
Date: 2024-07
New Economics Papers: this item is included in nep-fdg, nep-fmk, nep-ino and nep-sbm
Note: CF EFG PR
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w32643.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:32643

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w32643
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().