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

50 Pages Posted: 25 Mar 2017 Last revised: 3 Feb 2019

See all articles by Laura Anne Lindsey

Laura Anne Lindsey

Arizona State University (ASU) - Finance Department

Luke C.D. Stein

Arizona State University (ASU) - Finance Department

Date Written: January 1, 2019

Abstract

This paper examines the effects of a shock to angel finance on entrepreneurial activity and employment. Using public micro data from the U.S. Census, we construct a state-level estimate of the fraction of accredited investors likely affected by Dodd-Frank's elimination of housing wealth in the determination of accreditation status. We demonstrate that a larger reduction in the pool of potential accredited investors negatively affects firm entry and reduces employment levels at small entrants. Employment increases at small and young incumbents as workers are absorbed, and relative wages for the startup sector decline. Angel finance appears to be a complement to organized venture capital and of greater importance in less concentrated and lower startup-capital-intensive industries. Our paper quantifies the impact of angel finance at the margin and offers insight on the geographies and sectors where it matters most.

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)

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

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States
480-965-9412 (Phone)
480-965-8539 (Fax)

HOME PAGE: http://www.lukestein.com

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