Risk Attitudes and Private Business Equity

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may Abstract:Why do people engage in entrepreneurship and commit large parts of their personal wealth to their business, despite comparably low returns and high risk? This paper connects several streams of literature to shed some light on this puzzle and suggests possible future research avenues. Key insights from the literature are that entrepreneurs may operate in imperfect financial markets and that entrepreneurs are less risk-averse than the rest of the population. A focus of this paper is, therefore, on the role of heterogeneous risk attitudes in entrepreneurial decisions, specifically portfolio choice and the entry and exit decisions. Nonpecuniary benefits of entrepreneurship, such as being independent in the workplace, also contribute to an explanation of entrepreneurial behavior.

Risk preference and entrepreneurial investment at the top of the wealth distribution

“…In samples without the top tail of the wealth distribution, this result was reported for Germany based on the SOEP without SOEP-P(Fossen 2012;Fossen et al 2020) and for the USA based on the Survey of Consumer Finances(Gentry and Hubbard 2004).13 These are the shares of the aggregate asset values in aggregate gross wealth within the groups. When alternatively calculating the averages of the individual portfolio shares as done in Table1, the shares are 42% among the wealthy and 29% among the non-wealthy.…”