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Testing Agency Theory with Entrepreneur Effort and Wealth
Open accessAbstract
We develop a principal‐agent model in an entrepreneurial setting and test the model's predictions using unique data on entrepreneurial effort and wealth in privately held firms. Accounting for unobserved firm heterogeneity using instrumental‐variables techniques, we find that entrepreneurial ownership shares increase with outside wealth and decrease with firm risk; effort increases with ownership; and effort increases firm performance. The magnitude of the effects in the cross‐section of firms suggests that agency costs may help explain why entrepreneurs concentrate large fractions of their wealth in firm equity.
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Cited by
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Angeletos, G.-M. (2007) · Review of Economic Dynamics · doi:10.1016/j.red.2006.11.001 · Cited by 346
Bank Governance, Regulation, and Risk Taking
Laeven, L. A., & Levine, R. (2008) · SSRN Electronic Journal · doi:10.2139/ssrn.1142967 · Cited by 337
Smart Money? The Effect of Education on Financial Outcomes
Cole, S., Paulson, A., & Shastry, G. K. (2014) · Review of Financial Studies · doi:10.1093/rfs/hhu012 · Cited by 301
Metadata
- Authors
- BITLER, M. P., MOSKOWITZ, T. J., & VISSING‐JØRGENSEN, A.
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 2005-03-02
- Volume
- 60
- Issue
- 2
- Pages
- 539-576
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W2137546006
- Cited by
- 278
- References
- 0
- FWCI
- 70.48
- Type
- journal article
- Language
- en
- Open access
- green
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- BITLER, M. P., MOSKOWITZ, T. J., & VISSING‐JØRGENSEN, A. (2005). Testing Agency Theory with Entrepreneur Effort and Wealth. The Journal of Finance. https://doi.org/10.1111/j.1540-6261.2005.00739.x
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