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Appears in Collections:Economics Journal Articles
Peer Review Status: Refereed
Title: Risk tolerance and entrepreneurship
Author(s): Hvide, Hans K
Panos, Georgios
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Keywords: Entrepreneurial entry
Entrepreneurial performance
Risk tolerance
Risk aversion
Stock market participation
Issue Date: Jan-2014
Date Deposited: 8-May-2014
Citation: Hvide HK & Panos G (2014) Risk tolerance and entrepreneurship. Journal of Financial Economics, 111 (1), pp. 200-223.
Abstract: 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.
DOI Link: 10.1016/j.jfineco.2013.06.001
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