Implications of Differences in Cognitive Capabilities between Individuals and Small Businesses for Financial Regulation
Implications of Differences in Cognitive Capabilities between Individuals and Small Businesses for Financial Regulation
Keywords
No Thumbnail Available
Authors
Date
2020-08-20
Language
en
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
Individuals are better protected than businesses by means of regulations when they want to take a loan. This is based on the assumption that businesses make better financial decisions than consumers. While previous literature suggests that self-employed people have better cognitive capabilities than consumers, it is also reported that self-employed people face difficulties if they want to get a loan from which consumers are protected. This paper studies whether differences in financial literacy and numeracy exist between self-employed people and consumers, i.e. whether self-employed people have better cognitive capabilities that allow them to make better financial decisions. A dataset from the Netherlands (LISS Panel) and a dataset from Germany (SOEP) are used for this purpose. The paper provides evidence that differences in financial literacy and numeracy exist between self-employed people and consumers. Furthermore, the results show that financial literacy and numeracy have a positive effect on the probability to be self-employed.
Description
Citation
Supervisor
Faculty
Faculteit der Managementwetenschappen