Young entrepreneurs in the US, the UK, and elsewhere, are more likely to be secretive about their finances than those in wealthier nations, according to new research.
In fact, there’s a correlation between secrecy and a lack of wealth, according the report by University of California, Berkeley, economist Elizabeth Burchfield and her colleagues.
The study, published in the Journal of Finance, found that people in the top five income quintiles (those making more than $250,000) are far more likely than those who make less than $50,000 to keep their assets hidden from the public.
And those with higher incomes are less likely to report their financial affairs to the IRS, Burchfields study found.
“People in the upper middle class, those in the very high income bracket, have less information about their financial situation than those at lower incomes,” Burchfeld said.
“They’re much less likely than their lower-income peers to report it.”
The authors also found that the average age of an entrepreneur in the United States is 39.1 years old, a median age of the US population of 46.9 years.
They also found people in this income bracket are more open about their income than their counterparts in other rich nations, which may explain why the top 10% of Americans own about one-third of all US wealth.
The research also shows that there is a correlation with the type of income one earns.
Entrepreneurs with high income are more honest with the public about their own financial situations, while those in lower income brackets are less honest, the researchers found.
However, they also found the same trend of low disclosure is not present in the wealthiest countries, where secrecy is a common practice.
“We see a very strong association between transparency and wealth,” Bauchfield said.
The researchers suggest that the lack of transparency may be due to the fact that there are fewer institutions to rely on to provide information about financial matters, as well as the fact the public tends to be more willing to trust them.
The authors suggest that a better model for the future could be to provide the public with access to financial records for free, but they also note that this may be a challenge in a globalized economy.