NDLI: Market Mechanisms and Funding Dynamics in Equity Crowdfunding

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Market Mechanisms and Funding Dynamics in Equity Crowdfunding

Content Provider	Scilit
Author	Hornuf, Lars Schwienbacher, Armin
Copyright Year	2017
Description	Journal: SSRN Electronic Journal Equity crowdfunding is a new form of entrepreneurial finance, in which investors do not receive perks or engage in pre-purchase of the product, but rather participate in the future cash flows of a firm. In this paper, we analyze what determines individual investment decisions in this new financial market. One important factor that may influence the behavior of investors is the way the portal allocates securities. We use unique data from four German equity crowdfunding portals to examine how the allocation mechanism affects funding dynamics. In contrast with the crowdfunding campaigns on Kickstarter, on which the typical pattern of project support is U shaped, we find that equity crowdfunding dynamics are L shaped under a first-come, first- served mechanism and U shaped under a second-price auction. The evidence also shows that investors base their decisions on information provided by the entrepreneur in the form of updates as well as by the investment behavior and comments of other crowd investors.
Related Links	https://epub.uni-regensburg.de/36499/1/1-s2.0-S0929119916302450-main.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=2612998
ISSN	10914358
e-ISSN	15565068
DOI	10.2139/ssrn.2612998
Journal	SSRN Electronic Journal
Language	English
Publisher	Elsevier BV
Publisher Date	2017-08-03
Access Restriction	Open
Subject Keyword	Journal: SSRN Electronic Journal Information and Library Science Equity Crowdfunding Securities Issuance Investment Dynamics Entrepreneurial Finance
Content Type	Text
Resource Type	Article
Subject	Public Health, Environmental and Occupational Health Psychiatry and Mental Health

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