Which Entrepreneurs are Financially Constrained?

47 Pages Posted: 10 Apr 2020

See all articles by Miguel A. Ferreira

Miguel A. Ferreira

Nova School of Business and Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Marta Lopes

Nova School of Business and Economics

Francisco Queiro

Nova School of Business and Economics

Hugo Reis

Banco de Portugal

Date Written: November 18, 2019

Abstract

We study what type of entrepreneurs are affected by financial constraints. Our identification strategy exploits age-based discontinuities in the amount of funding available through a public program for unemployed workers. We find that access to funding increases the rate of entrepreneurship. The effect is stronger for entrepreneurs who incorporate their business, especially for those in the top decile of the wage distribution before unemployment. Tracking performance over time, we find that the effect is more pronounced for entrepreneurs in the top quintile of the firm size distribution across all businesses and in the middle of the firm size, growth and profitability distributions among incorporated businesses. Our findings suggest that financial constraints hamper growth-oriented entrepreneurship.

Keywords: Entrepreneurship, Unemployment insurance, Financial constraints, Incorporated firms

JEL Classification: G38, H74, J65, J68, L26

Suggested Citation

Ferreira, Miguel Almeida and Lopes, Marta and Queiro, Francisco and Reis, Hugo, Which Entrepreneurs are Financially Constrained? (November 18, 2019). Available at SSRN: https://ssrn.com/abstract=3543021 or http://dx.doi.org/10.2139/ssrn.3543021

Miguel Almeida Ferreira (Contact Author)

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Marta Lopes

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

HOME PAGE: http://www.novasbe.unl.pt/en/

Francisco Queiro

Nova School of Business and Economics ( email )

Lisbon, 1099-085
Portugal

Hugo Reis

Banco de Portugal ( email )

148, Rua do Comercio
Lisbon, P - 1101
Portugal

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