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Wilfrid Laurier University Leaf
December 20, 2014

Canadian Excellence

Wendy Wu




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Wendy Wu

Testing the Effects of Capital Structure on Entrepreneurial Effort


Yan Wendy Wu

published: 2010 | Research publication | Refereed Jounals

Yan Wendy Wu, (2010). "Testing the Effects of Capital Structure on Entrepreneurial Effort," Applied Financial Economics, Vol. 20, 785-794

ABSTRACT: Do entrepreneurs work less or harder when they borrow more? This paper tests how entrepreneurial effort is affected by the firm's financing choice. In line with the typical agency theory prediction, entrepreneur effort is negatively related to the magnitude of equity financing. Furthermore, accounting for firm and entrepreneur heterogeneities, I find that entrepreneurs work less when they use more debt financing, and higher firm risk leads to greater entrepreneurial effort reductions.

revised Jul 12/10

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