Risk tolerance and entrepreneurship

Hans K. Hvide, Georgios A. Panos

Research output: Contribution to journalArticlepeer-review

118 Citations (Scopus)


A theoretical tradition argues that more risk tolerant individuals are more likely to become entrepreneurs but perform worse. We test and confirm these predictions with several risk tolerance proxies. Using investment data for 400,000 individuals, we find that common stock investors are around 50% more likely to subsequently start up a firm. Firms started up by common stock investors have about 25% lower sales and 15% lower return on assets. The results are similar using personal leverage and other risk-tolerance proxies. We do not find support for alternative explanations such as unobserved wealth or behavioral effects.
Original languageEnglish
Pages (from-to)200-223
Number of pages24
JournalJournal of Financial Economics
Issue number1
Early online date7 Jun 2013
Publication statusPublished - 1 Jan 2014


  • Stock market participation
  • Entrepreneurial entry
  • Entrepreneurial performance
  • Risk tolerance
  • Risk aversion


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