Entrepreneurs, Risk Aversion, and Dynamic Firms

• 成果类型: Article
• 署名作者: Herranz, Neus; Krasa, Stefan; Villamil, Anne P.
• 署名单位: University of Illinois System; University of Illinois Chicago; University of Illinois Chicago Hospital; University of Iowa
• 刊物名称: JOURNAL OF POLITICAL ECONOMY
• ISSN/ISSBN: 0022-3808
• DOI: 10.1086/682678
• 发表日期: 2015
• 页码: 1133-1176
• 关键词: DEBT CONTRACTS; default risk; equilibrium; ENFORCEMENT; bankruptcy; frictions

摘要

How do entrepreneurs vary firm size, capital structure, and default to manage risk? We show that more risk-averse entrepreneurs run smaller, more highly leveraged firms and default less, because running a smaller firm with higher debt reduces personal funds at risk in the firm. Optimal default depends on ex ante debt, consumption forgone from firm liquidation, and owner capacity to inject funds. We show that entrepreneurs sacrifice current consumption in the hope of future success that never materializes for the bottom 25 percent, but entrepreneurship is a path toward great wealth and high consumption for the top quartile.