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Does risk aversion affect individuals’ interests and actions in angel investing? Empirical evidence from Japan

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  • Honjo, Yuji
  • Ikeuchi, Kenta
  • Nakamura, Hiroki

Abstract

This study explores individuals’ interests and actions in angel investing. Using a sample of Japanese individuals who are interested and engage in general investing obtained from original survey data, we examine whether risk aversion and subjective time discounting are associated with angel investing. To provide a clear picture of potential and actual angel investors, we classify individuals’ attitudes toward angel investing into “no interest,” “interest only,” and “action.” By estimating the marginal effects of risk aversion on angel investment, we find that individuals’ risk aversion is negatively associated with their angel investment actions; that is, individuals with a higher degree of risk aversion are less likely to engage in angel investing. We also find that wealthy individuals are more likely to engage in angel investing. Moreover, among individuals with entrepreneurial experience, subjective time discounting is positively associated with their angel investment actions, suggesting that entrepreneurs with higher subjective time discounting are more likely to engage in angel investing.

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  • Honjo, Yuji & Ikeuchi, Kenta & Nakamura, Hiroki, 2024. "Does risk aversion affect individuals’ interests and actions in angel investing? Empirical evidence from Japan," Japan and the World Economy, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:japwor:v:70:y:2024:i:c:s0922142524000161
    DOI: 10.1016/j.japwor.2024.101253
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    More about this item

    Keywords

    Action; Angel investing; Entrepreneurial experience; Generalized ordered probit model; Interest; Risk aversion;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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