NDLI: Crowdfunding Under Market Feedback, Asymmetric Information And Overconfident Entrepreneur

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Crowdfunding Under Market Feedback, Asymmetric Information And Overconfident Entrepreneur

Content Provider	Scilit
Author	Miglo, Anton
Copyright Year	2017
Description	Journal: SSRN Electronic Journal This article is the first one that considers a model of the choice between the different types of crowdfunding, which contains elements of the asymmetric information approach and behavioral finance (overconfident entrepreneurs). The model provides several implications, most of which have not yet been tested. Our model predicts that equity-based crowdfunding is more profitable than reward-based crowdfunding when an entrepreneur is overconfident. This is because either the entrepreneur learns from the sale of shares before making production decisions or because the crowd anticipates the entrepreneur's behavior when valuing the shares offered for sale. The model also predicts that an equilibrium can exist where high-quality firms use equity-based crowdfunding in equilibrium which contrasts the spirit of traditional results (for example pecking-order theory) where equity represents an inferior security. The latter has rational managers. It also contrasts traditional behavioral finance literature (for example, Fairchild (2005)) where equity is not issued in equilibrium.
Related Links	https://mpra.ub.uni-muenchen.de/89015/1/MPRA_paper_89015.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=3135095
ISSN	10914358
e-ISSN	15565068
DOI	10.2139/ssrn.3135095
Journal	SSRN Electronic Journal
Language	English
Publisher	Elsevier BV
Publisher Date	2017-01-01
Access Restriction	Open
Subject Keyword	Journal: SSRN Electronic Journal Asymmetric Information Equity-based Crowdfunding Reward-based Crowdfunding Entrepreneurship and Learning
Content Type	Text
Resource Type	Article
Subject	Public Health, Environmental and Occupational Health Psychiatry and Mental Health

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