Angels, Entrepreneurship, and Employment Dynamics: Evidence from Investor Accreditation Rules

55 Pages Posted: 25 Mar 2017 Last revised: 10 Feb 2020

See all articles by Laura Anne Lindsey

Laura Anne Lindsey

Arizona State University (ASU) - Finance Department

Luke C.D. Stein

Babson College

Date Written: January 1, 2019

Abstract

This paper examines the effects of a shock to angel finance on entrepreneurial activity and employment. Using U.S. Census data, we estimate the state-level fraction of households that lost accreditation status from Dodd–Frank’s elimination of housing wealth in determining accreditation. A larger reduction in the pool of potential investors reduces firm entry and employment at small entrants, particularly in areas with alternate sources of financing. Employment increases at small and young incumbents, and relative wages for the startup sector decline, especially for high-skilled workers and industries. These results suggest that angels are an important source of entrepreneurial finance to high-quality, competitive firms.

JEL Classification: G24, G28, L26, K22

Suggested Citation

Lindsey, Laura Anne and Stein, Luke C.D., Angels, Entrepreneurship, and Employment Dynamics: Evidence from Investor Accreditation Rules (January 1, 2019). Sixth Annual Conference on Financial Market Regulation, Available at SSRN: https://ssrn.com/abstract=2939994 or http://dx.doi.org/10.2139/ssrn.2939994

Laura Anne Lindsey

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

Luke C.D. Stein (Contact Author)

Babson College ( email )

Tomasso Hall
231 Forest Street
Babson Park, MA 02457-0310
United States
781-239-5223 (Phone)

HOME PAGE: http://lukestein.com

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