Cost of entrepreneurial capital and under-diversification: A Euro-Mediterranean perspective

Pierpaolo Pattitoni, Barbara Petracci, Valerio Potì and Massimo Spisni

Research in International Business and Finance, 2013, vol. 27, issue 1, 12-27

Abstract: We assess how owner's commitment to a firm influences the firm cost of capital, and whether the relation between the former and the latter is the consequence of the owner's higher opportunity cost of capital resulting from under-diversification. Using data on private Mediterranean firms and clustering projects by country, industry, and Initial Public Offering-year, we show that the cost of capital is magnified by entrepreneur's commitment, project total risk, and correlation between project and market return.

Keywords: Opportunity cost of capital; Commitment; Small and Medium Business; Entrepreneurship (search for similar items in EconPapers)
JEL-codes: G11 L26 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:27:y:2013:i:1:p:12-27

DOI: 10.1016/j.ribaf.2012.04.004

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