Signaling in Equity Crowdfunding
49 Pages Posted: 15 Oct 2012 Last revised: 5 Oct 2014
Date Written: October 14, 2012
This paper presents an initial empirical examination of which start-up signals will induce small investors to commit financial resources in an equity crowdfunding context. We examine the impact of firms’ financial roadmaps (e.g., preplanned exit strategies such as IPOs or acquisitions), external certification (awards, government grants and patents), internal governance (such as board structure), and risk factors (such as amount of equity offered and the presence of disclaimers) on fundraising success. Our data highlight the importance of financial roadmaps and risk factors, as well as internal governance, for successful equity crowdfunding. External certification, by contrast, has little or no impact on success. We also discuss the implications for successful policy design.
Keywords: Entrepreneurial Finance, (Equity) Crowdfunding, Micro Lending, Internet, Signaling
JEL Classification: G21, G24, L26
Suggested Citation: Suggested Citation