Financing Constraints, Home Equity and Selection into Entrepreneurship

46 Pages Posted: 7 Oct 2014 Last revised: 17 Aug 2020

See all articles by Thais Jensen

Thais Jensen

Independent

Søren Leth‐Petersen

University of Copenhagen - Department of Economics; Centre for Economic Policy Research (CEPR)

Ramana Nanda

Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: August 10, 2020

Abstract

We exploit a Danish mortgage reform that differentially unlocked home equity across the population and study how this impacts selection into entrepreneurship. We find that increased entry from the treated group was concentrated among entrepreneurs whose firms were founded in industries where they had no prior work experience. Our results are consistent with a view that individuals who took advantage of the unlocked home equity were entrepreneurs with less-well-established track records, who could now overcome credit constraints by pledging tangible assets and bear greater potential risk themselves. Also consistent with this view, we find that firms founded by treated entrepreneurs included an increase in longer-lasting businesses as well as an increase in startups that were more likely to quickly-fail.

Suggested Citation

Jensen, Thais and Leth-Petersen, Soren and Nanda, Ramana, Financing Constraints, Home Equity and Selection into Entrepreneurship (August 10, 2020). Harvard Business School Entrepreneurial Management Working Paper No. 15-020, Available at SSRN: https://ssrn.com/abstract=2506111 or http://dx.doi.org/10.2139/ssrn.2506111

Thais Jensen

Independent ( email )

Soren Leth-Petersen

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Ramana Nanda (Contact Author)

Harvard University - Entrepreneurial Management Unit ( email )

Boston, MA 02163
United States

HOME PAGE: http://www.people.hbs.edu/rnanda

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
209
Abstract Views
1,923
rank
157,522
PlumX Metrics