Are Crowdfunding Platforms Active and Effective Intermediaries?

56 Pages Posted: 9 Dec 2016 Last revised: 10 Jun 2019

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

Yelin Zhang

Gonzaga University - School of Business Administration

Date Written: March 31, 2018

Abstract

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

Cumming, Douglas J. and Zhang, Yelin, Are Crowdfunding Platforms Active and Effective Intermediaries? (March 31, 2018). Available at SSRN: https://ssrn.com/abstract=2882026 or http://dx.doi.org/10.2139/ssrn.2882026

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

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

Yelin Zhang (Contact Author)

Gonzaga University - School of Business Administration ( email )

Spokane, WA
United States

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