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Is There a Trade-off Between Protecting Investors and Promoting Entrepreneurial Activity? Evidence from Angel Financing.
- Source :
- Journal of Financial & Quantitative Analysis; Dec2023, Vol. 58 Issue 8, p3305-3341, 37p
- Publication Year :
- 2023
-
Abstract
- This article studies how changes in investor protection regulations affect local entrepreneurial activity, relying on the heterogeneous impact of a 2011 SEC regulation change on the definition of accredited investors across U.S. cities. Using a difference-in-differences approach, I show that cities more affected by the regulation change experienced a significantly larger decrease in local angel financing, entrepreneurial activity, innovation output, employment, and sales. I find that small business loans and second-lien mortgages became entrepreneurs' partial substitutes for angel investment. My cost-benefit analysis suggests that the costs of protecting angel investors through the 2011 regulation change outweigh its benefits. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 00221090
- Volume :
- 58
- Issue :
- 8
- Database :
- Complementary Index
- Journal :
- Journal of Financial & Quantitative Analysis
- Publication Type :
- Academic Journal
- Accession number :
- 174185393
- Full Text :
- https://doi.org/10.1017/S0022109022001314