Why Do Firms Fail after Equity Crowdfunding Campaigns? Evidence from France

30 Pages Posted: 4 Apr 2018

See all articles by Karima Bouaiss

Karima Bouaiss

Université Lille Nord de France - Lille School of Management Research Center (LSMRC)

Girard Carine

Independent

C. Zopounidis

Technical University of Crete (TUC) - Department of Production Engineering and Management

Date Written: March 30, 2018

Abstract

The purpose of this article is to study the failure of companies that have used crowdfunding equity financing. We assume that certain characteristics of the different campaigns carried out by equity crowdfunding (ECF) can be explanatory elements of the final failure of the firm. Based on evidence from 202 firms that conducted ECF campaigns on the four leading ECF platforms in France from January 2010 to July 2017, we revealed with logit regression analysis several factors that led to the failure of 32 firms (15.84% of the sample). A lower level of investor participation in ECF campaigns and a lower amount of capital requested are associated with failure. The failure probability is also associated with the low amount of capital requested. The lack of ambition in fundraising leads to failure due to the absence of an increased monitoring effect exerted by additional investors. There is no evidence that one failed ECF campaign leads to an escalation of the firm’s failure. Absence of a B2B business model; higher number of entrepreneurial team founders; and lack of women in the entrepreneurial team were also predictive of failure. We conclude with suggestions to reduce the probability of failure for firms conducting ECF campaigns.

Keywords: equity crowdfunding; failure; entrepreneurial finance

JEL Classification: L26

Suggested Citation

Bouaiss, Karima and Carine, Girard and Zopounidis, Constantin, Why Do Firms Fail after Equity Crowdfunding Campaigns? Evidence from France (March 30, 2018). Available at SSRN: https://ssrn.com/abstract=3153175 or http://dx.doi.org/10.2139/ssrn.3153175

Karima Bouaiss (Contact Author)

Université Lille Nord de France - Lille School of Management Research Center (LSMRC) ( email )

Lille, 59000
France

Girard Carine

Independent ( email )

No Address Available

Constantin Zopounidis

Technical University of Crete (TUC) - Department of Production Engineering and Management ( email )

University Campus
Chania
Crete, 73100
Greece
+30 28210 37236 (Phone)
+30 28210 69410, 37236 (Fax)

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