Assistant Professor of Finance
Family Wealth and Entrepreneurship
This paper provides evidence that family financial resources--not those of the immediate household, but those of the extended family members and close relatives--alleviate credit constraints experienced by entrepreneurs, and stimulate entrepreneurial activities. I build a rich and detailed combination of data on a representative sample of the Swedish population, their family members and the enterprises they run, and show that abundant financial resources in the family motivate initiating businesses in industries with high financial costs of entry. This finding is neither driven by inherited or acquired ability from family members, nor by valuable entrepreneurial experience of relatives. Moreover, I find that individuals with wealthier family members initiate larger businesses. The relation between the structure of financial resources in the family--liquid assets, fixed assets, and income--and the composition of startup capital--equity, debt, and loans from credit institutions-- suggests that family contributes to the financing of startups directly by investing cash in firms' equity or indirectly by providing collateral and guarantees for firms' bank loans. In addition, I find that the marginal entrepreneur financed by family wealth enjoys an income gain after transitioning to entrepreneurship.
Motives for Entrepreneurial Saving: Evidence from Sweden
This paper investigates the motives for the high saving rates of entrepreneurial households. We use a unique dataset that links Swedish households’ wealth and income to the financial statements of their firms. We exploit the decision to enter, stay in entrepreneurship or leave it. In comparison to the rest of the population, entrepreneurs save one percent more of their income a year before starting a business and 1.9 percent more on their personal accounts while in business. We find that the elevated saving rates among business owners are consistent with the precautionary saving motive among owners of unlimited liability firms and with investment related reasons among owners of limited liability firms. They save on their personal and business accounts. We provide suggestive evidence that entrepreneurs respond to income risk or lack of investment capital by increasing their saving rate.
Labor Protection Laws and Firm Volatility
This paper examines the effect of employee-protection legislation on firm's performance volatility. I use inter-temporal variations in employment protection laws across 21 OECD countries and find that pro-labor reforms are associated with an increase in the volatility of firm profitability as well as a decline in firm Return on Asset (ROA). I find no significant effect on firm sales or asset growth, suggesting that the positive relation of labor protection and firm volatility is essentially explained by higher labor cost due to less flexibility of firms in their employees’ contracts and dismissals. Consistent with the labor cost explanation, the paper shows that this positive relation is more pronounced in firms performing in industries where labor is a more important input of production. In addition, the result is stronger for small firms with lower number of employees. These results indicate that the lack of firms' flexibility in employees’ contract and dismissals due to more stringent labor laws leads to higher fluctuations of firm profitability.