Crowdfunding Under Market Feedback, Asymmetric Information And Overconfident Entrepreneur

A. Miglo. (2020). Crowdfunding Under Market Feedback, Asymmetric Information And Overconfident Entrepreneur. Entrepreneurship Research Journal (De Gruyter), forthcoming.

Posted: 26 Feb 2020

See all articles by Anton Miglo

Anton Miglo

University of Salford; Birmingham City University

Multiple version iconThere are 2 versions of this paper

Date Written: February 6, 2020

Abstract

This article is the first one that considers a model of the choice between the different types of crowdfunding, which contains elements of the asymmetric information approach and behavioral finance (overconfident entrepreneurs). The model provides several implications, most of which have not yet been tested. Our model predicts that equity-based crowdfunding is more profitable than reward-based crowdfunding when an entrepreneur is overconfident. This is because the entrepreneur learns from the sale of shares before making production decisions. The model also predicts that an equilibrium can exist where some firms use equity-based crowdfunding, which contrasts the results of traditional theories (which have rational managers), for example the pecking-order theory. It also contrasts traditional behavioral finance literature (e.g. Fairchild 2005) where equity is not issued in equilibrium.

Keywords: entrepreneurial finance, crowdfunding, asymmetric information, overconfidence, equity-based crowdfunding, reward-based crowdfunding, entrepreneurship and learning

JEL Classification: D82, G32, L11, L26, M13

Suggested Citation

Miglo, Anton, Crowdfunding Under Market Feedback, Asymmetric Information And Overconfident Entrepreneur (February 6, 2020). A. Miglo. (2020). Crowdfunding Under Market Feedback, Asymmetric Information And Overconfident Entrepreneur. Entrepreneurship Research Journal (De Gruyter), forthcoming., Available at SSRN: https://ssrn.com/abstract=3533485

Anton Miglo (Contact Author)

University of Salford ( email )

Salford, Greater Manchester M5 4WT
United Kingdom

Birmingham City University ( email )

School of Social Sciences
City North Campus
Birmingham, West Midlands B42 2SU
United Kingdom

HOME PAGE: http://https://www.bcu.ac.uk/business-school/about-us/our-staff/anton-miglo

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