Risk Tolerance and Entrepreneurship
Copyright policy )Risk Tolerance and Entrepreneurship
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.
- University of Glasgow United Kingdom
- University of Stirling United Kingdom
- University of Aberdeen United Kingdom
- University of Bergen Norway
- Institute for the Study of Labor Germany
330, L26, Entrepreneurial entry, Stock market participation, entrepreneurial entry, entrepreneurial performance, firm entry, firm performance, firm productivity, firm survival, overconfidence, risk aversion, risk tolerance, stock market participation, Risk tolerance, overconfidence, firm entry, entrepreneurial entry; entrepreneurial performance; firm entry; firm performance; firm productivity; firm survival; overconfidence; risk aversion; stock market participation, ddc:330, firm survival, risk aversion, Risk aversion, firm performance, firm productivity, stock market participation, entrepreneurial entry, entrepreneurial performance, risk tolerance, Entrepreneurial performance, jel: jel:D22, jel: jel:G02, jel: jel:L26, jel: jel:C30, jel: jel:D14
330, L26, Entrepreneurial entry, Stock market participation, entrepreneurial entry, entrepreneurial performance, firm entry, firm performance, firm productivity, firm survival, overconfidence, risk aversion, risk tolerance, stock market participation, Risk tolerance, overconfidence, firm entry, entrepreneurial entry; entrepreneurial performance; firm entry; firm performance; firm productivity; firm survival; overconfidence; risk aversion; stock market participation, ddc:330, firm survival, risk aversion, Risk aversion, firm performance, firm productivity, stock market participation, entrepreneurial entry, entrepreneurial performance, risk tolerance, Entrepreneurial performance, jel: jel:D22, jel: jel:G02, jel: jel:L26, jel: jel:C30, jel: jel:D14
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