Enfranchising the crowd: Nominee account equity crowdfunding

Center for Financial Studies Working Paper No. 664, 2021

49 Pages Posted:

See all articles by Jerry Coakley

Jerry Coakley

University of Essex - Essex Business School

Douglas J. Cumming

Florida Atlantic University

Aristogenis Lazos

Audencia Business School

Silvio Vismara

University of Bergamo

Date Written: November 22, 2021

Abstract

The nominee approach to equity crowdfunding pools all crowd investors into one (nominee) account where typically the platform acts as the legal owner but the crowd retains beneficial ownership. The platform plays an active digital corporate governance role that simultaneously enfranchises crowd investors with voting and ownership rights but removes the administrative burden on startups of having to deal with several hundred shareholders. Through an inter-platform and intra-platform analysis of a large sample of 1,018 initial equity crowdfunding campaigns, this paper assesses both the short-term and the long-term impact of nominee versus direct ownership. It finds that nominee initial campaigns are on average more successful than direct ownership campaigns in that they are more likely to succeed, raise more funds, attract overfunding and enjoy greater long run success in terms of successful seasoned equity crowdfunded offerings, numbers of such offerings, and probability of survival. These results hold inter-platform between the two main UK equity crowdfunding platforms (Seedrs and Crowdcube) as well as intra-platform, using the post-2015 quasi-natural experiment when the nominee approach became an option for startups raising capital on Crowdcube.

Keywords: Entrepreneurial finance; corporate governance, nominee account

JEL Classification: G240, M130

Suggested Citation

Coakley, Jerry and Cumming, Douglas J. and Lazos, Aristogenis and Vismara, Silvio, Enfranchising the crowd: Nominee account equity crowdfunding (November 22, 2021). Center for Financial Studies Working Paper No. 664, 2021, Available at SSRN: https://ssrn.com/abstract=

Jerry Coakley

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom
+44 1206 872455 (Phone)
+44 1206 873429 (Fax)

HOME PAGE: http://https://www.essex.ac.uk/people/coakl35000/jerry-coakley

Douglas J. Cumming (Contact Author)

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://sites.google.com/view/douglascumming/bio?authuser=0

Aristogenis Lazos

Audencia Business School ( email )

8 Road Joneliere
BP 31222
Nantes Cedex 3, 44312
France

Silvio Vismara

University of Bergamo ( email )

Via dei Caniana
2
Bergamo, 24127
Italy
24127 (Fax)

HOME PAGE: http://https://scholar.google.it/citations?user=Sa8sBkoAAAAJ&hl=en

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