Does Risk Aversion Affect Individuals’ Interests and Actions in Angel Investing? Empirical Evidence from Japan

This study explores individuals’ interests and actions in angel investing. Using a sample of Japanese individuals who are interested and engage in general investing obtained from original survey data, we examine whether risk aversion and time discounting are associated with angel investing. To provide a clear picture of potential and actual angel investors, we classify individuals’ attitudes toward angel investing into “no interest,” “interest only,” and “action.” By estimating the marginal effects of risk aversion on angel investment, we find that individuals’ risk aversion is negatively associated with their angel investment actions; that is, individuals with a higher degree of relative risk aversion are less likely to engage in angel investing. We also find that wealthy individuals are more likely to engage in angel investing. Moreover, among individuals with entrepreneurial experience, the time discount rate is positively associated with their angel investment actions, suggesting that entrepreneurs with higher time discounting are more likely to engage in angel investing