Financing constraints, home equity and selection into entrepreneurship

Thais Laerkholm Jensen, Søren Leth-Petersen and Ramana Nanda

Journal of Financial Economics, 2022, vol. 145, issue 2, 318-337

Abstract: We exploit a mortgage reform that differentially unlocked home equity across the Danish population and study how this impacted selection into entrepreneurship. We find that increased entry was concentrated among entrepreneurs whose firms were founded in industries where they had no prior work experience. Nevertheless, we find that marginal entrants benefiting from the reform had higher pre-entry earnings and a significant share of these entrants started longer-lasting firms. Our results are most consistent with a view that housing collateral enabled higher ability individuals with less-well-established track records to overcome credit rationing and start new firms, rather than only leading to ‘frivolous entry’ by those without prior industry experience.

Keywords: Financing constraints; Entrepreneurship; Home equity; Mortgage (search for similar items in EconPapers)
JEL-codes: G21 L26 M13 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Working Paper: Financing Constraints, Home Equity and Selection into Entrepreneurship (2021)
Working Paper: Financing Constraints, Home Equity and Selection into Entrepreneurship (2021)
Working Paper: Financing Constraints, Home Equity and Selection into Entrepreneurship (2014)
Working Paper: Financing Constraints, Home Equity and Selection into Entrepreneurship (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:145:y:2022:i:2:p:318-337

DOI: 10.1016/j.jfineco.2021.10.012

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