Professional Reputation, Cash, and Transition to Entrepreneurial Activity
Loss, Frédéric; Renucci, Antoine (2005), Professional Reputation, Cash, and Transition to Entrepreneurial Activity, AFFI 2005 (Association Française de Finance), 2005-12, Paris, France
TypeCommunication / Conférence
Conference titleAFFI 2005 (Association Française de Finance)
MetadataShow full item record
Abstract (EN)We analyze the role of professional reputation in the transition to entrepreneurial activity when credit is rationed. We study an employee's willingness to allow the market to learn information about talent by choosing more or less informative projects. This choice impacts the employee's incentives to exert effort, which determines the wage, and in turn the cash to be invested in the business venture. We show that reputation and cash are substitutes in overcoming credit rationing. However, maintaining a good reputation conflicts with accumulating cash. Hence, employees adopt a different strategy depending on their initial reputation. Besides, starting a business venture early can in expectation be easier than waiting in order to build a reputation and accumulate cash.
Subjects / KeywordsCorporate finance; Econométrie; Professional reputation; entrepreneurship
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