For Love or Money? A Study of Financial Returns on Informal Investments in Businesses Owned by Relatives, Friends, and Strangers
REGIONAL FRONTIERS OF ENTREPRENEURSHIP RESEARCH, L.M. Gillin, ed., Melbourne: Swinburne University, 2007
Presented at the AGSE Entrepreneurship Research Conference, Queensland University of Technology, Brisbane, Australia, February 2007
Babson College Center for Entrepreneurship Research Paper No. 2008-09
15 Pages Posted: 31 Oct 2008
Date Written: September, 17 2008
Abstract
Agency and altruism theory are combined to develop a framework for explaining expected returns on informal investments in 35 countries that participated in the Global Entrepreneurship Monitor (GEM) in 2004 and 2005. The principal finding is that altruism affects expected returns. Expected returns increase as the relationship distance between the investor and the entrepreneur increases; men expect higher returns than women; entrepreneurs expect higher returns than non-entrepreneurs; expected returns increase as the amount invested increases; old persons expect lower returns than young ones; entrepreneurs expect higher returns on investments in their own businesses than on their investments in others' businesses.
Keywords: Agency theory, Altruism, Informal Investor, Angel, Returns, Payback, 3F, GEM, Entrepreneur
JEL Classification: M13
Suggested Citation: Suggested Citation