Law, Trust, and the Development of Crowdfunding

67 Pages Posted: 20 Jun 2017 Last revised: 6 Aug 2018

Date Written: August 1, 2018


Using a unique hand-collected sample of crowdfunding volume obtained by surveying over 3,000 crowdfunding platforms worldwide, I document the global patterns and determinants of crowdfunding, an innovative form of financing that has grown faster than any other financial innovation in the recent past. Crowdfunding volume within a country appears to be driven by rational economic reasons. The rule of law, quality of regulation, control of corruption, ease of entry, and financial profitability of extant intermediaries all determine the volume of crowdfunding. I find little evidence that trust, adventure-seeking, or other social factors matter.

Keywords: Alternative Finance, Distributed Finance, Crowdsourcing, Crowdfunding, Law and Finance, Peer-To-Peer, P2P Lending, Equity Crowdfunding, Social Finance

JEL Classification: G21, G23

Suggested Citation

Rau, P. Raghavendra, Law, Trust, and the Development of Crowdfunding (August 1, 2018). Available at SSRN: or

P. Raghavendra Rau (Contact Author)

University of Cambridge ( email )

Cambridge Judge Business School
Trumpington Street
Cambridge, Cambridgeshire CB21AG
United Kingdom
3103626793 (Phone)


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