Work

Risk Taking by Entrepreneurs

Year: 2009

Type: article

Abstract: Entrepreneurs bear substantial risk, but empirical evidence shows no sign of a positive premium. This paper develops a theory of endogenous entrepreneurial risk taking that explains why self-financed entrepreneurs may find it optimal to invest in risky projects offering no risk premium. Consistently with empirical evidence, the model predicts that poorer entrepreneurs are more likely to undertake risky projects. It also finds that incentives for risk taking are stronger when agents are impatient. (JEL G31, G32, L25, L26)

Source: American Economic Review

DOI: 10.1257/aer.99.5.1808

Authors: Galina Vereshchagina, Hugo A. Hopenhayn

Institutions: Arizona State University, University of California, Los Angeles

Language: English

Topic: Private Equity and Venture Capital

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

OpenAlex ID: W1976374830

FWCI: 19.37

Cites: 54

Cited by: 246

Related to: 10