Financing Efficiency of Securities-Based Crowdfunding
68 Pages Posted: 20 Nov 2015 Last revised: 16 Feb 2018
Date Written: February 13, 2018
Securities-based crowdfunding is characterized by (i) all-or-nothing financing, (ii) limited investment capacity, and (iii) non-cooperative investors. All-or-nothing financing encourages contributions regardless of an investor's information as bad projects are more likely to be canceled, i.e. a loser's blessing. Limited investment capacity discourages contributions due to a winner's curse: good projects are likely to be split among more investors and bad projects are likely to be split among fewer. Both the loser's blessing and the winner's curse adversely affect financing efficiency. If investors are atomistic, financing outcomes reflect no information.
Keywords: Crowdfunding, Loser's Blessing, Entrepreneurial Finance, FinTech
JEL Classification: G10, G18, G24, G28
Suggested Citation: Suggested Citation