Financing constraints, home equity and selection into entrepreneurship

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Title: Financing constraints, home equity and selection into entrepreneurship
Authors: Jensen, TL
Leth-Petersen, S
Nanda, R
Item 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.
Issue Date: Aug-2022
Date of Acceptance: 9-Jul-2021
URI: http://hdl.handle.net/10044/1/93861
DOI: 10.1016/j.jfineco.2021.10.012
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/
Keywords: 1402 Applied Economics
1502 Banking, Finance and Investment
1606 Political Science
Finance
Publication Status: Published
Embargo Date: 2023-05-24
Online Publication Date: 2021-11-25
Appears in Collections:Imperial College Business School



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