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Personal Wealth, Self-Employment, and Business Ownership
[House prices, collateral, and self-employment]

Author

Listed:
  • Aymeric Bellon
  • J Anthony Cookson
  • Erik P Gilje
  • Rawley Z Heimer
  • Stijn Van Nieuwerburgh

Abstract

We study the effect of personal wealth on entrepreneurial decisions using data on mineral payments from Texas shale drilling to individuals throughout the United States. Large cash windfalls increase business formation by 0.8 to 2.1 percentage points, but do not affect transitions to self-employment. By contrast, cash windfalls significantly extend self-employment spells, but do not affect the duration of business ownership. Our findings help reconcile contrasting findings in prior work: liquidity constraints have different effects on entrepreneurial activity that may depend on the entrepreneur’s motivations.

Suggested Citation

  • Aymeric Bellon & J Anthony Cookson & Erik P Gilje & Rawley Z Heimer & Stijn Van Nieuwerburgh, 2021. "Personal Wealth, Self-Employment, and Business Ownership [House prices, collateral, and self-employment]," The Review of Financial Studies, Society for Financial Studies, vol. 34(8), pages 3935-3975.
    • Handle: RePEc:oup:rfinst:v:34:y:2021:i:8:p:3935-3975.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhab044
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    Citations

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    Cited by:

    1. Jensen, Thais Laerkholm & Leth-Petersen, Søren & Nanda, Ramana, 2022. "Financing constraints, home equity and selection into entrepreneurship," Journal of Financial Economics, Elsevier, vol. 145(2), pages 318-337.
    2. Zhou, Zhengyi, 2022. "The effects of state-led relocation on labor market participation: Evidence from China," China Economic Review, Elsevier, vol. 73(C).
    3. Barrios, John M. & Hochberg, Yael V. & Yi, Hanyi, 2022. "Launching with a parachute: The gig economy and new business formation," Journal of Financial Economics, Elsevier, vol. 144(1), pages 22-43.
    4. Cookson, J. Anthony & Gilje, Erik P. & Heimer, Rawley Z., 2022. "Shale shocked: Cash windfalls and household debt repayment," Journal of Financial Economics, Elsevier, vol. 146(3), pages 905-931.
    5. Ma, Song & Murfin, Justin & Pratt, Ryan, 2022. "Young firms, old capital," Journal of Financial Economics, Elsevier, vol. 146(1), pages 331-356.
    6. Vicente J. Bermejo & Miguel A. Ferreira & Daniel Wolfenzon & Rafael Zambrana, 2022. "Windfall gains and entrepreneurial activity: Evidence from the Spanish Christmas lottery," Nova SBE Working Paper Series wp651, Universidade Nova de Lisboa, Nova School of Business and Economics.

    More about this item

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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