Protecting Investors in Equity Crowdfunding: An Empirical Analysis of the Small Investor Protection Act

Technological Forecasting and Social Change, Forthcoming

CESifo Working Paper No. 8351

44 Pages Posted: 1 Oct 2020

See all articles by Maximilian Goethner

Maximilian Goethner

University of Jena

Lars Hornuf

University of Bremen - Faculty of Business Studies and Economics; Max Planck Institute for Innovation and Competition; CESifo (Center for Economic Studies and Ifo Institute)

Tobias Regner

Universität Jena

Date Written: 2020

Abstract

During the past decade, equity crowdfunding (ECF) has emerged as an alternative funding channel for startup firms. In Germany, the Small Investor Protection Act became binding in July 2015, with the legislative goal to protect investors engaging in this new asset class. Since then, investors pledging more than 1,000 EUR now must self-report their income and wealth. Investing more than 10,000 EUR in a single ECF issuer is only possible through a corporate entity. We examine how the Small Investor Protection Act has affected investor behavior at Companisto, Germany's largest ECF portal for startup firms. The results show that after the new law became binding, sophisticated investors invest less on average while casual investors invest more. Moreover, the signaling capacity of large investments has disappeared.

JEL Classification: E220, G180, G380, K220, L260

Suggested Citation

Goethner, Maximilian and Hornuf, Lars and Regner, Tobias, Protecting Investors in Equity Crowdfunding: An Empirical Analysis of the Small Investor Protection Act (2020). Technological Forecasting and Social Change, Forthcoming, CESifo Working Paper No. 8351, Available at SSRN: https://ssrn.com/abstract=3623686

Maximilian Goethner (Contact Author)

University of Jena ( email )

Furstengraben 1
Jena, Thuringa 07743
Germany

Lars Hornuf

University of Bremen - Faculty of Business Studies and Economics ( email )

Bremen, D-28359
Germany
+49 89 20348619 (Phone)

HOME PAGE: http://www.hornuf.com

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Tobias Regner

Universität Jena ( email )

Carl-Zeiss-Str. 3
Jena, 07743
Germany

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