For love or money? A study of financial returns on informal investments in businesses owned by relatives, friends, and strangers

Agency and altruism theory are combined to develop a framework for explaining expected returns on informal investments in 35 countries that participated in the Global Entrepreneurship Monitor (GEM) in 2004 and 2005. The principal finding is that altruism affects expected returns. Expected returns increase as the relationship distance between the investor and the entrepreneur increases; men expect higher returns than women; entrepreneurs expect higher returns than non-entrepreneurs; expected returns increase as the amount invested increases; old persons expect lower returns than young ones; entrepreneurs expect higher returns on investments in their own businesses than on their investments in others’ businesses.