The Role of Assurance in Equity Crowdfunding

62 Pages Posted: 8 Oct 2019

See all articles by Evisa Bogdani

Evisa Bogdani

University of Kentucky

Monika Causholli

University of Kentucky - Von Allmen School of Accountancy

W. Robert Knechel

University of Florida - Fisher School of Accounting

Date Written: July 2019

Abstract

Equity crowdfunding (ECF) refers to the process of raising capital by selling securities through the internet to small, non-accredited investors. The ECF market is regulated by the SEC and the requirements include provision of assured financial statements. Assurance can be provided in one of three ways: certification by management, or an audit or review by an independent accountant. We utilize the ECF setting to examine whether assurance facilitates capital formation. We find that firms that provide either reviewed or audited financial statements are more likely to reach their target capital, attract a greater number of investors, and raise more capital relative to firms that only provide management-certified financial statements. We do not find evidence that equity crowdfunding campaigns accompanied by audited financial statements are more successful than those with reviewed financial statements. Our findings provide evidence on how assurance facilitates capital formation in a new type of capital market.

Keywords: equity crowdfunding, assurance, audit, reviews

Suggested Citation

Bogdani, Evisa and Causholli, Monika and Knechel, W. Robert, The Role of Assurance in Equity Crowdfunding (July 2019). Available at SSRN: https://ssrn.com/abstract=3462582 or http://dx.doi.org/10.2139/ssrn.3462582

Evisa Bogdani

University of Kentucky ( email )

Lexington, KY 40506
United States
8595504158 (Phone)
40503 (Fax)

Monika Causholli (Contact Author)

University of Kentucky - Von Allmen School of Accountancy ( email )

Lexington, KY 40506
United States

W. Robert Knechel

University of Florida - Fisher School of Accounting ( email )

Warrington College of Business
PO Box 117166
Gainesville, FL 32611-7166
United States

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