Are Crowdfunding Platforms Active and Effective Intermediaries?
56 Pages Posted: 9 Dec 2016 Last revised: 10 Jun 2019
Date Written: March 31, 2018
Crowdfunding platform due diligence comprises background checks, site visits, credit checks, cross checks, account monitoring, and third party proof on funding projects. Based on data from over 70% of Canadian platforms over 2013-2016, we find that due diligence application is associated with busyness of platform employees, sophistication of platform service indicated by fee structure, and type or complexity of campaigns. We expect that due diligence screens lower quality projects and mitigates information asymmetries between project issuers and funders. Regression results show that due diligence is associated with higher percentage of successful campaigns and larger amount of capital raised on platforms.
Keywords: crowdfunding, entrepreneurship, intermediaries
JEL Classification: G23, G24, L26
Suggested Citation: Suggested Citation