Does consumer protection enhance disclosure credibility in reward crowdfunding?

Stefano Cascino, Maria Correia and Ane Tamayo

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study how the interplay of disclosure and regulation shapes capital allocation in reward crowdfunding. Using data from Kickstarter, the largest online reward crowdfunding platform, we show that, even in the absence of clear regulation and enforcement mechanisms, disclosure helps entrepreneurs access capital for their projects and bolsters engagement with potential project backers, consistent with the notion that disclosure mitigates moral hazard. We further document that, subsequent to a change in Kickstarter’s terms of use that increases the threat of consumer litigation, the association between project funding and disclosure becomes stronger. This evidence suggests that consumer protection regulation enhances the perceived credibility of disclosure. We find the effect of the change in terms of use to be more pronounced in states with stricter consumer protection regulations. Taken together, our findings yield important insights on the role of disclosure, as well as on the potential effects of increased regulation on crowdfunding platforms.

Keywords: crowdfunding; Disclosure; Consumer Protection; Regulation; Enforcement (search for similar items in EconPapers)
JEL-codes: G18 M41 O31 O38 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2019-12-01
New Economics Papers: this item is included in nep-acc, nep-ban, nep-law, nep-pay, nep-ppm and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published in Journal of Accounting Research, 1, December, 2019, 57(5), pp. 1247-1302. ISSN: 0021-8456

Downloads: (external link)
http://eprints.lse.ac.uk/102103/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:102103

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().