Entrepreneurs, Legal Institutions and Firm Dynamics
AbstractThis paper assesses quantitatively the impact of legal institutions on entrepreneurial firm dynamics. Owners choose firm size, financial structure and default to manage risk. We find: (i) Less risk averse entrepreneurs run bigger firms and it is optimal for them to incorporate, while more risk averse entrepreneurs run smaller firms and generally are better off remaining unincorporated. (ii) More risk-averse owners tend to default more often than the less risk averse, though they carry less debt. (iii) The model estimates a credit constraint, which binds for many but not all entrepreneurs and matches bank lending criteria. The model also finds modest differences in owner risk aversion, consistent with micro studies.
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Bibliographic InfoPaper provided by Economics, The Univeristy of Manchester in its series Centre for Growth and Business Cycle Research Discussion Paper Series with number 128.
Length: 44 pages
Date of creation: 2009
Date of revision:
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Web page: http://www.socialsciences.manchester.ac.uk/subjects/economics/our-research/centre-for-growth-and-business-cycle-research/
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-07 (All new papers)
- NEP-BEC-2009-11-07 (Business Economics)
- NEP-ENT-2009-11-07 (Entrepreneurship)
- NEP-REG-2009-11-07 (Regulation)
- NEP-UPT-2009-11-07 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Glenn W Harrison & John A List & Charles Towe, 2007.
"Naturally Occurring Preferences and Exogenous Laboratory Experiments: A Case Study of Risk Aversion,"
Econometrica, Econometric Society,
Econometric Society, vol. 75(2), pages 433-458, 03.
- Glenn Harrison & John List & Charles Towe, 2004. "Naturally occurring preferences and exogenous laboratory experiments: A case study of risk aversion," Framed Field Experiments 00155, The Field Experiments Website.
- Hugo A. Hopenhayn & Galina Vereshchagina, 2003.
"Risk Taking by Entrepreneurs,"
RCER Working Papers
500, University of Rochester - Center for Economic Research (RCER).
- Galina Vereshchagina & Hugo A. Hopenhayn, 2009. "Risk Taking by Entrepreneurs," American Economic Review, American Economic Association, American Economic Association, vol. 99(5), pages 1808-30, December.
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