 Market mechanisms and funding dynamics in equity crowdfundingLars Hornuf and Armin Schwienbacher Journal of Corporate Finance, 2018, vol. 50, issue C, 556-574 Abstract: Equity crowdfunding is a new form of entrepreneurial finance, in which investors do not receive perks or engage in pre-purchase of the product, but rather participate in the future cash flows of a firm. In this paper, we analyze what determines individual investment decisions in this new financial market. One important factor that may influence the behavior of investors is the way the portal allocates securities. We use unique data from four German equity crowdfunding portals to examine how the allocation mechanism affects funding dynamics. In contrast with the crowdfunding campaigns on Kickstarter, on which the typical pattern of project support is U shaped, we find that equity crowdfunding dynamics are L shaped under a first-come, first-served mechanism and U shaped under a second-price auction. The evidence also shows that investors base their decisions on information provided by the entrepreneur in the form of updates as well as by the investment behavior and comments of other crowd investors. Keywords: Equity crowdfunding; Crowdinvesting; Startups; Securities issuance; Investment dynamics; Entrepreneurial finance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:50:y:2018:i:c:p:556-574 DOI: 10.1016/j.jcorpfin.2017.08.009 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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