Financing constraints, home equity and selection into entrepreneurship
File(s)
Accepted version
Author(s)
Jensen, Thais Laerkholm
Leth-Petersen, Søren
Nanda, Ramana
Type
Journal Article
Abstract
We exploit a mortgage reform that differentially unlocked home equity across the Danish population and study how this impacted selection into entrepreneurship. We find that increased entry was concentrated among entrepreneurs whose firms were founded in industries where they had no prior work experience. Nevertheless, we find that marginal entrants benefiting from the reform had higher pre-entry earnings and a significant share of these entrants started longer-lasting firms. Our results are most consistent with a view that housing collateral enabled higher ability individuals with less-well-established track records to overcome credit rationing and start new firms, rather than only leading to ‘frivolous entry’ by those without prior industry experience.
Date Issued
2022-08
Date Acceptance
2021-07-09
Citation
Journal of Financial Economics, 2022, 145 (2), pp.318-337
ISSN
0304-405X
Publisher
Elsevier BV
Start Page
318
End Page
337
Journal / Book Title
Journal of Financial Economics
Volume
145
Issue
2
Copyright Statement
© 2021 Elsevier Ltd. All rights reserved. This manuscript is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Licence http://creativecommons.org/licenses/by-nc-nd/4.0/
Identifier
https://www.sciencedirect.com/science/article/pii/S0304405X21004773?via%3Dihub
Subjects
1402 Applied Economics
1502 Banking, Finance and Investment
1606 Political Science
Finance
Publication Status
Published
Date Publish Online
2021-11-25