When a company's owner's stock portfolio goes down in value, the business suffers, too, according to a new study.
Researchers looked at the stock portfolios of entrepreneurs during the 2008 financial crisis in Norway, where detailed income and investing data are available, and found that a 10% stock loss reduced employment growth by 5% from 2007 to 2010.
In younger companies, job levels still hadn't recovered five years after the crisis began.
"I show that for entrepreneurs whose stock portfolios take a hit, their businesses are adversely affected to a greater extent than established businesses," says researcherarius Ring of the Texas McCombs business school, per the Wall Street Journal.
"Such business constrictions are concentrated among younger companies, he noted, because older companies have more financial options."
So why are younger companies more sensitive to their owners' investment setbacks? Ring's answer: "more mature firms seem to be able to substitute other sources of financing, such as banks."
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