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Ability or Finances as Constraints on Entrepreneurship? Evidence from Survival Rates in a Natural Experiment

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  • Steffen Andersen
  • Kasper Meisner Nielsen

Abstract

We use a natural experiment in Denmark to test the hypothesis that aspiring entrepreneurs face financial constraints because of low entrepreneurial quality. We identify 304 constrained entrepreneurs who start a business after receiving windfall wealth and examine the performance of these marginal entrepreneurs. We find that constrained entrepreneurs have significantly lower survival rates and lower profits when compared with a matched sample of unconstrained entrepreneurs. These results are consistent with the hypothesis that the marginal entrepreneur is of low quality. The Author 2012. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.

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Bibliographic Info

Article provided by Society for Financial Studies in its journal The Review of Financial Studies.

Volume (Year): 25 (2012)
Issue (Month): 12 ()
Pages: 3684-3710

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Handle: RePEc:oup:rfinst:v:25:y:2012:i:12:p:3684-3710

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Cited by:
  1. Hvide, Hans K. & Panos, Georgios A., 2013. "Risk Tolerance and Entrepreneurship," IZA Discussion Papers 7206, Institute for the Study of Labor (IZA).
  2. Becker, Sascha O. & Hvide, Hans K., 2013. "Do entrepreneurs matter?," The Warwick Economics Research Paper Series (TWERPS) 1002, University of Warwick, Department of Economics.
  3. repec:cge:warwcg:108 is not listed on IDEAS

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