The Role of Assurance in Equity Crowdfunding

62 Pages Posted: 8 Oct 2019 Last revised: 27 Jan 2021

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: January 26, 2021

Abstract

The SEC requires equity crowdfunding (ECF) companies to provide assured financial statements. Assurance can be provided with certification by management or an audit or review by an independent accountant. We utilize the ECF setting to examine whether voluntary assurance facilitates capital formation. We find that companies that provide either reviewed or audited financial statements during a capital campaign are marginally more likely to raise their target capital. They also raise more funds and attract more investors relative to companies that only provide management-certified financial statements. However, relative to reviews, audits are not associated with a greater likelihood of success in an ECF offering other than attracting more investors. Finally, we find that assurance is indirectly associated with a company’s post-ECF survival and its ability to raise future capital. This suggests that assurance at the time of ECF has implications for a company’s success beyond ECF.

Keywords: equity crowdfunding, assurance, audit, reviews

Suggested Citation

Bogdani, Evisa and Causholli, Monika and Knechel, W. Robert, The Role of Assurance in Equity Crowdfunding (January 26, 2021). 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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