TY - JOUR
T1 - Risk taking by entrepreneurs
AU - Vereshchagina, Galina
AU - Hopenhayn, Hugo A.
PY - 2009/12
Y1 - 2009/12
N2 - 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).
AB - 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).
UR - http://www.scopus.com/inward/record.url?scp=74949108763&partnerID=8YFLogxK
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U2 - 10.1257/aer.99.5.1808
DO - 10.1257/aer.99.5.1808
M3 - Article
AN - SCOPUS:74949108763
VL - 99
SP - 1808
EP - 1830
JO - American Economic Review
JF - American Economic Review
SN - 0002-8282
IS - 5
ER -