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dc.contributor.authorLee, Samuel-
dc.contributor.authorPersson, Petra-
dc.date.accessioned2012-06-28T19:45:15Z-
dc.date.available2012-06-28T19:45:15Z-
dc.date.issued2012-06-28T19:45:15Z-
dc.identifier.urihttp://hdl.handle.net/2451/31577-
dc.description.abstractFinancing from family and friends is the predominant type of informal finance. This paper proposes a theory that reconciles two seemingly paradoxical traits of this form of finance, namely, it is often provided at negative prices but nevertheless eschewed by borrowers. A central prediction is that such finance, while breeding trust, deters risk taking. Demand is thus constrained: entrepreneurs may forgo risky investment rather than finance it through family and friends. Formal finance is valuable precisely because it is regulated only by contract. The highlighted trade-offs between formal and informal finance are potentially relevant for the provision of microventure capital.en
dc.language.isoen_USen
dc.relation.ispartofseriesFIN-12-007-
dc.titleFinancing from Family and Friendsen
dc.typeWorking Paperen
dc.authorid-ssrn473212en
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