Capital Formation and Financial Intermediation: The Role of Entrepreneur Reputation Formation

43 Pages Posted: 1 Nov 2014 Last revised: 12 Apr 2016

See all articles by Emma Li

Emma Li

Department of Finance

J. Spencer Martin

University of Melbourne - Faculty of Business and Economics; Financial Research Network (FIRN)

Date Written: March 7, 2016

Abstract

Recently a new type of institution has emerged, crowd funders. These entities: 1) channel capital to create intellectual property; 2) gather information on project and entrepreneur quality; and 3) gauge demand information directly from individuals to improve the efficiency of capital allocation. Data from crowd funder Kickstarter allows new insights on capital formation and the role of entrepreneurial reputation formation in the venture funding process. This funding method includes all cases where entrepreneurs try yet fail to raise funds, a feature heretofore unavailable to researchers. We find that both positive and negative reputation acquisition significantly change measures of capital raising success.

Keywords: Crowd Funding, Financial Innovation

JEL Classification: G21, G23, G32

Suggested Citation

Li, Emma and Martin, J. Spencer, Capital Formation and Financial Intermediation: The Role of Entrepreneur Reputation Formation (March 7, 2016). Journal of Corporate Finance, Forthcoming, FIRN Research Paper No. 2517273, Available at SSRN: https://ssrn.com/abstract=2517273 or http://dx.doi.org/10.2139/ssrn.2517273

Emma Li (Contact Author)

Department of Finance ( email )

221 Burwood Highway
Burwood, Victoria 3125
Australia

J. Spencer Martin

University of Melbourne - Faculty of Business and Economics ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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