Signaling in Equity Crowdfunding

45 Pages Posted: 4 Dec 2013 Last revised: 22 Nov 2014

See all articles by Gerrit Ahlers

Gerrit Ahlers

A.T. Kearney GmbH

Douglas J. Cumming

Florida Atlantic University

Christina Guenther

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics

Denis Schweizer

Concordia University

Date Written: December 2, 2013

Abstract

This paper presents a first-ever empirical examination of the effectiveness of signals that entrepreneurs use to induce (small) investors to commit financial resources in an equity crowdfunding context. We examine the impact of venture quality (human capital, social (alliance) capital, and intellectual capital) and uncertainty on fundraising success. Our data highlight that retaining equity and providing more detailed information about risks can be interpreted as effective signals and can therefore strongly impact the probability of funding success. Social capital and intellectual capital, by contrast, have little or no impact on funding success. We discuss the implications for successful policy design.

Keywords: Entrepreneurial Finance, (Equity) Crowdfunding, Micro Lending, Internet, Signaling

JEL Classification: G21, G24, L26

Suggested Citation

Ahlers, Gerrit and Cumming, Douglas J. and Guenther, Christina and Schweizer, Denis, Signaling in Equity Crowdfunding (December 2, 2013). Available at SSRN: https://ssrn.com/abstract=2362340 or http://dx.doi.org/10.2139/ssrn.2362340

Gerrit Ahlers

A.T. Kearney GmbH ( email )

Charlottenstra├če 57
Berlin, 10117
Germany

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://booksite.elsevier.com/9780124095373/

Christina Guenther

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics ( email )

Kahlaische Strasse 10
D-07745 Jena, 07745
Germany

Denis Schweizer (Contact Author)

Concordia University ( email )

1455 de Maisonneuve Blvd. W.
Montreal, Quebec H3G 1M8
Canada
+1 (514) 848-2424 ext. 2926 (Phone)
+1 (514) 848-4500 (Fax)

HOME PAGE: http://www.concordia.ca/jmsb/faculty/denis-schweizer.html

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