Soft and Hard Information and Signal Extraction in Securities Crowdfunding

66 Pages Posted: 13 Nov 2017

See all articles by Anzhela Knyazeva

Anzhela Knyazeva

Independent; New York University (NYU) - Leonard N. Stern School of Business

Vladimir I. Ivanov

US Securities & Exchange Commission

Date Written: November 13, 2017


We examine the impact of information flows on financing and the relative roles of hard information, soft information, and certification of issuer quality by third parties, using novel evidence from the US securities-based crowdfunding market. While hard information about the issuer’s financial condition and experience has only marginal relevance for offering outcomes, third-party certification of issuer quality as well as soft information about the issuer proxied by social media following plays a significant role in crowdfunding offerings. The relative roles of hard information and certification are greatest in offerings of more information-sensitive securities and when investors are less likely to derive nonpecuniary returns from participating in an offering. Further, there is evidence of partial substitution between different signals of issuer quality. Both third-party certification and issuer social media following are positively related to the valuation obtained by the issuer. Issuers tailor deal features, specifically, the choice of funding target flexibility and offering duration, to the level of information asymmetry about issuer quality. Finally, there is some evidence of geographic matching, with issuer characteristics and local availability of platforms affecting distance between issuers and platforms.

Keywords: crowdfunding, entrepreneurial firms, information asymmetry, soft information, social capital

Suggested Citation

Knyazeva, Anzhela and Ivanov, Vladimir, Soft and Hard Information and Signal Extraction in Securities Crowdfunding (November 13, 2017). Fifth Annual Conference on Financial Market Regulation. Available at SSRN:

Anzhela Knyazeva (Contact Author)

Independent ( email )

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New York University (NYU) - Leonard N. Stern School of Business ( email )

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New York, NY NY 10012
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Vladimir Ivanov

US Securities & Exchange Commission ( email )

Washington, DC
United States
202-551-5307 (Phone)

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