Risk tolerance and entrepreneurship
Hans Hvide and
Georgios Panos ()
Journal of Financial Economics, 2014, vol. 111, issue 1, 200-223
A theoretical tradition argues that more risk tolerant individuals are more likely to become entrepreneurs but perform worse. We test and confirm these predictions with several risk tolerance proxies. Using investment data for 400,000 individuals, we find that common stock investors are around 50% more likely to subsequently start up a firm. Firms started up by common stock investors have about 25% lower sales and 15% lower return on assets. The results are similar using personal leverage and other risk-tolerance proxies. We do not find support for alternative explanations such as unobserved wealth or behavioral effects.
Keywords: Entrepreneurial entry; Entrepreneurial performance; Risk tolerance; Risk aversion; Stock market participation (search for similar items in EconPapers)
JEL-codes: C30 D14 D22 G02 L26 (search for similar items in EconPapers)
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Working Paper: Risk tolerance and entrepreneurship (2013)
Working Paper: Risk Tolerance and Entrepreneurship (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:111:y:2014:i:1:p:200-223
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