Overfunding and Signaling Effects of Herding Behavior in Crowdfunding

Svatopluk Kapounek and Zuzana Kucerova

No 7973, CESifo Working Paper Series from CESifo

Abstract: The paper employs a dynamic market-wide herding behavior measure of 117,166 lending-based campaigns in 119 online platforms in 37 countries that explores whether lenders follow each other in the whole crowdfunding market, within the groups of top platforms, within the specific category or platform, and within the specific category in the specific platform. We show that herding behavior plays an important signaling role in reducing opportunity costs if the auction does not receive enough monetary bids. Additionally, our threshold models identify significant herding behavior after funding goals are raised and highlight the controversial effects of signaling mechanisms on adverse selection in crowdfunding markets.

Keywords: asymmetric information; crowdfunding; herding behavior; overfunding; peer-to-peer lending; signaling (search for similar items in EconPapers)
JEL-codes: C55 D26 G21 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-cfn, nep-net and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_7973

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