NBER Working Papers · 2026 · Annika Bacher、Andreas Fagereng、Marius A. K. Ring、Ella Getz Wold
Abstract
Governments have long imposed minimum equity requirements on new corporations. Opponents view them as barriers to entry while proponents argue that they protect stakeholders from financially unviable businesses. We study this quantity-quality trade-off using a Norwegian reform and comprehensive data linking entrepreneurs to their firms. A 70% reduction in required capital nearly doubled entrepreneurial entry, with no deterioration in survival, profitability, productivity, or interest-bearing leverage and no differences in founders’ ex-ante income, liquidity, or ability. These results suggest capital requirements restrict entrepreneurship without screening on quality or liquidity. Rather, we highlight returns-to-scale heterogeneity as an important determinant of the observed entry response.