Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71721
Authors: 
Hvide, Hans K.
Panos, Georgios A.
Year of Publication: 
2013
Series/Report no.: 
Discussion Paper Series, Forschungsinstitut zur Zukunft der Arbeit 7206
Abstract: 
A tradition from Knight (1921) argues that more risk tolerant individuals are more likely to become entrepreneurs, but perform worse. We test these predictions with two risk tolerance proxies: stock market participation and personal leverage. Using investment data for 400,000 individuals, we find that common stock investors are around 50 percent more likely to subsequently start up a firm. Firms started up by stock market investors have about 25 percent lower sales and 15 percent lower return on assets. The results are similar using personal leverage as risk tolerance proxy. We consider alternative explanations including unobserved wealth and behavioral effects.
Subjects: 
entrepreneurial entry
entrepreneurial performance
firm entry
firm performance
firm productivity
firm survival
overconfidence
risk aversion
risk tolerance
stock market participation
JEL: 
L26
Document Type: 
Working Paper

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