Risk Taking By Entrepreneurs

42 Pages Posted: 4 Jun 2007

See all articles by Galina M. Vereshchagina

Galina M. Vereshchagina

Arizona State University (ASU) - Economics Department; University of Iowa

Hugo A. Hopenhayn

University of California, Los Angeles (UCLA) - Department of Economics

Date Written: October 2006

Abstract

Entrepreneurs bear substantial risk, but empirical evidence shows no sign of a positive premium. This paper develops a theory of endogenous entrepreneurial risk taking that explains why self-financed entrepreneurs may find it optimal to invest in risky projects offering no risk premium. The model has also a number of implications for firm dynamics supported by empirical evidence, such as a positive correlation between survival, size, and firm age.

Keywords: entrepreneurship, risk taking, private equity, occupational choice, firm dynamics

JEL Classification: D9, E21, L16

Suggested Citation

Vereshchagina, Galina M. and Hopenhayn, Hugo A., Risk Taking By Entrepreneurs (October 2006). Available at SSRN: https://ssrn.com/abstract=990928 or http://dx.doi.org/10.2139/ssrn.990928

Galina M. Vereshchagina (Contact Author)

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

Tempe, AZ 85287-3806
United States

HOME PAGE: http://www.raspopov.net/GALA/

University of Iowa ( email )

Acquisitions
5020 Main Library
Iowa City, IA 52242-1000
United States

HOME PAGE: http://www.biz.uiowa.edu/faculty/results.cfm?id=2187

Hugo A. Hopenhayn

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Los Angeles, CA 90095-1477
United States

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