Donors, Buyers, and Information Disclosure in Crowdfunding Markets: A Case of Platform Split-up

62 Pages Posted: 7 Jan 2021 Last revised: 9 Feb 2021

See all articles by Lu Yan

Lu Yan

Purdue University, Krannert School of Management

Ting Zhu

Purdue University - Krannert School of Management

Qiang Liu

Purdue University - Krannert School of Management

Date Written: February 8, 2021

Abstract

Crowdfunding platforms, a fast-growing method for entrepreneurs to finance their ventures, are struggling in improving crowdfunding campaigns’ market performance as platforms expand to include more diverse participants. In this paper, the authors study how a platform policy that changes the platform size and backer composition (donors vs. buyers) influences the platform participant behaviors and the platform market outcomes, using an event study of Indiegogo’s launch of Generosity.com for charity campaigns. Their results show a higher probability of reaching funding goals and more funds collected for the Indiegogo platform's business campaigns after the platform split-up. Such changes are driven by fewer campaigns being launched on Indiegogo after the platform change, and more importantly, more costly campaign information (such as images and videos) provided by the campaign creators. Buyers are more sensitive to such campaign information and, therefore, contribute more to campaigns after the platform change. These results are consistent with the notion that the entrepreneurs’ information disclosure strategy is driven by potential backers’ motivations to support the campaign. The study provides rich and important managerial implications for platforms and their participants.

Keywords: platform, crowdfunding, information asymmetry, donors, buyers, information disclosure

Suggested Citation

Yan, Lu and Zhu, Ting and Liu, Qiang, Donors, Buyers, and Information Disclosure in Crowdfunding Markets: A Case of Platform Split-up (February 8, 2021). Available at SSRN: https://ssrn.com/abstract=3723845 or http://dx.doi.org/10.2139/ssrn.3723845

Lu Yan (Contact Author)

Purdue University, Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Ting Zhu

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Qiang Liu

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

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