IFin Seminar, Andrew Ellul, Indiana University - "Entrepreneurs' Diversification and Labor Income Risk"
Institute of Finance
Date: 15 May 2025 / 12:25 - 13:40
Speaker: IFin Seminar, Andrew Ellul, Indiana University""
Title: "Entrepreneurs’ Diversification and Labor Income Risk"
Date: May 15, 2025
Ore: 12:25 - 13:40
Room: Red Room - Executive Center
Lugano West Campus
Abstract
Entrepreneurs with better diversified portfolios provide more insurance to employees
against labor income risk: in a sample of over 524,000 Canadian firms and 858,000
owners, firms owned by more diversified entrepreneurs offer more stable jobs and
earnings to employees when hit by shocks. A one standard deviation increase in
owner’s diversification reduces the shock’s pass-through rate to labor layoffs by 13%
and to workers’ earnings by 41%. The data are consistent with such insurance
being partly provided to retain valuable human capital and partly to avoid costly
terminations.