The Borrower's Curse: Optimism, Finance and Entrepreneurship

摘要: This paper argues that most of the facts characterising small-scale businesses, including high failure rates, reliance on bank credit rather than equity finance, relatively low interest rate margins, and rationing, can be explained by a tendency for those who are excessively optimistic to dominate new entrants. Drawing findings in psychology, we model entrants as naive optimisers. Banks other hand viewed well informed efficient processors information. 'The over-weening conceit which greater part men have their own abilities, is an ancient evil remarked philosophers moralists all ages. Their absurd presumption good fortune, has been less taken notice of. It is, however, if possible still more universal. There no man living who, when tolerable health spirits, not some share it. The chance gain every or overvalued, loss under-valued, scarce any man, valued it worth.'