Browsing by Author "Vergara, Marcos"
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Item Credit rationing or entrepreneurial risk aversion? A comment(2013) Bonilla, Claudio; Vergara, MarcosCressy (2000) argues that the positive correlation between assets and the rate of business startups is due to DARA preferences. We show however that the required property is prudence, and prudence is consistent with DARA, IARA or CARA.Publication New results on precautionary saving and nonlinear risks(2022) Vergara, Marcos; Bonilla, ClaudioWe study precautionary saving in a two-period model that allows for nonlinear risks and nonseparable preferences. Permitting nonlinear risk effects is important because they are common in the developing world or when worldwide shocks hit economies, like the COVID-19 pandemic. Allowing nonseparable preferences is also important because they admit the incorporation of intergenerational transfer, habit persistence and other specific features of intertemporal decision making. We decompose the risk shock using Davis’s (Int Econ Rev 30(1):131–136, 1989) compensation method and analyze the income and substitution effect of an increase in risk. We prove that the substitution effect is always negative and, therefore, the income effect must be positive and larger in size to have a precautionary net effect. We then apply the method to various sources of risk, such as income, interest rate and wealth risk. We analyze the magnitude of each effect and find the conditions required to guarantee precautionary saving in each case. Our results are presented as signs of covariances, which provides a new perspective on precautionary saving.Item Ownership Concentration of Family and Non-Family Firms and the Relationship to Performance(School of Business and Economics, Universidad del Desarrollo, 2014-12) Acuña, Guillermo Ignacio; Sepúlveda, Jean P.; Vergara, MarcosThis paper analyzes whether family enterprises perform better than non-family enterprises, as found in previous studies on Chilean companies, based on the ownership structure of the business, which is an important factor in the literature on corporate governance that had not been taken into account. The analysis confirmed that family enterprises performed better than non-family enterprises and that the effect of ownership concentration on business performance depends on the type of enterprise, regardless of whether it is family-owned. Lastly, the results suggest that performance is better when there is a concentrated ownership, comprised both of shareholders who are family members and others who are not, than with other schemes of corporate governanceItem Precautionary saving in mean-variance models and different sources of risk(2021) Vergara, Marcos; Bonilla, Claudio A.We study the effects of first- and second-order risk increases on precautionary saving in a mean-variance model. In doing so, we reduce the gap between the theory of saving, which mainly stems from the expected utility model, and empirical estimations of the theory that are based on different measures of dispersion; these are atheoretical concepts that do not arise from optimal agent behavior. We then analyze what effects different risk sources have on saving and show that our results, derived in the mean-variance space, can easily be translated to conditions in the expected utility space. We argue that our contribution establishes a more solid ground for analyzing policies in highly risky environments, such as the COVID-19 pandemic.Item Precautionary saving: A taxonomy of prudence(2017) Vergara, MarcosWe extend Gunning (2010) by analyzing the effect of risk on saving. We derive a general prudence index that determines the threshold for the future risk that makes saving increase. We relate our results to the utility premium of Friedman–Savage.Item Risk aversion, downside risk aversion, and the transition to entrepreneurship(2020) Bonilla, Claudio A.; Vergara, MarcosIn this paper, we discuss the transition from secure employment to risky selfemployment (entrepreneurship) caused by a small increase in wealth. Building on the apportioning risk literature, we prove that the transition from secure employment to risky entrepreneurship is based on a measure of the difference between the strength of downside risk aversion and the strength of risk aversion. This result highlights the idea that using the behavioral approach of risky lotteries to study entrepreneurship can produce different results from the traditional economic theory of entrepreneurship, which can have policy implications that must be considered with caution.Item The Complementarity Effect: Effort and Sharing in the Entrepreneur and Venture Capital Contract(School of Business and Economics, Universidad del Desarrollo, 2016-04) Vergara, Marcos; Bonilla, Claudio A.; Sepúlveda, Jean P.Item The complementarity effect: Effort and sharing in the entrepreneur and venture capital contract(2016) Vergara, Marcos; Bonilla, Claudio A; Sepulveda, Jean PThis paper focuses on the relationship between the venture capitalist and the entrepreneur. In particular, it analyses how both players’ unobservable effort levels affect the equity share that the entrepreneur is willing to cede to the venture capitalist. We solve the entrepreneur’s maximization problem in the presence of double-sided moral hazard. In this scenario, we show that the venture capitalist’s share is binding and, therefore, there is no efficiency wage. We simulate the model and show that the entrepreneur’s effort does not monotonically decrease in the share allocated to the venture capital, while the venture capitalist’s effort does not monotonically increase in his share. We show that as efforts tend to be more complementary, the project cash flows are distributed nearly equally, at approximately 50% for each partner. This theoretical finding is actually observed in real contracts between entrepreneurs and venture capitalists.Item The effect of bank ownership and deposit insurance on monetary policy transmission revisited: the role of precautionary savings(2022) Sepúlveda, Jean P.; Vergara, MarcosWe generalize the Model of Andries and Billon (2010) by allowing for a general type of consumer‘s preferences that allows the presence of prudent behavior. Having precautionary savings changes the model's implication that the existence of public banks diminishes the effectiveness of monetary policy. Indeed, the new setup shows that the existence of public banks may increase or decrease the effect of monetary policy on the level of loan supply depending upon the degree of relative risk aversion