Opportunity cost of capital for entrepreneurs: An empirical analysis for Italy

Pierpaolo Pattitoni, Barbara Petracci and Massimo Spisni

Banca Impresa Società, 2009, issue 3, 443-472

Abstract: This paper applies a recent approach, developed in the entrepreneurial finance literature, to estimate opportunity cost of capital for Italy. Specifically, the cost of capital is analyzed both for under-diversified entrepreneurs and for well diversified investors. Classifying entrepreneurial projects by industries, three main results are obtained: a) the greater the degree of total risk of a project, the greater the cost of capital; b) the less the entrepreneur's commitment on the project, the less the cost of capital; c) the less the correlation between the project returns and the market returns, the greater the benefits of commitment reduction.

Keywords: Entrepreneurial finance; cost of capital; commitment; diversification (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:mul:jqmthn:doi:10.1435/31016:y:2009:i:3:p:443-472

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