Risk Tolerance and Entrepreneurship

By Hans K. Hvide, Georgios A. Panos. Social Science Research Network, 2013

252 citations recorded by the source corpus.

A theoretical tradition argues that more risk tolerant individuals are more likely to become entrepreneurs but perform worse. We test and confirm these predictions with several risk tolerance proxies. Using investment data for 400,000 individuals, we find that common stock investors are around 50% more likely to subsequently start up a firm. Firms started up by common stock investors have about 25% lower sales and 15% lower return on assets. The results are similar using personal leverage and other risk-tolerance proxies. We do not find support for alternative explanations such as unobserved wealth or behavioral effects.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/3fca0cbfa4c13150a8ad195fe4c5db2f38a65509

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Citations in the corpus

Personality Traits of Entrepreneurs: A Review of Recent Literature (2018, unknown): “On the individual level, Hvide and Panos (2014) measure risk preference through stock market participation, personal leverage, and the fraction of wealth invested in the stock market.”
The effect of early entrepreneurship education: Evidence from a field experiment (2014, background): “…is given by δ¼ΔyT %ΔyC ð1Þ Double differencing removes potential biases associated with the common development of the children over time that are unrelated to the program (Imbens and Wooldridge, 2009).33 The skills we measure, although related to entrepreneurship, can be developed in several ways.”
Digital financial capability and entrepreneurial performance (2021, background): “In brief, DFC increases the probability of business owners implementing Business innovation through Online sale moderated by Social network, which may act as a low-cost network of open innovation (Huston & Sakkab, 2006).”
Personality trait differences across types of entrepreneurs: a systematic literature review (2021, background): “2010), some observed that higher Risk propensity related to lower performance (Hvide and Panos 2014), and some revealed that higher Risk propensity related to higher performance (Cucculelli and Ermini 2013).”
An Analysis of the Determinants of Entrepreneurial Intentions among Students: A Romanian Case Study (2016, background): “The characteristic that sets out a clear difference between an entrepreneur and an employee is the ability to take risks [45–47].”
Personal Characteristics of Entrepreneurs in the Context of Perception and Management of Business Risk in the Sme Segment (2015, background): “(According to Hvide and Panos, 2014 the individuals who are more risk tolerant are more likely to start up fi rms.) A signifi cant part of the motivation to take risks in business follows from the success motivation.”