The effect of lead investors’ trustworthiness on funding performance: The moderating effect of investment-specific human capital

Ye Zhang, Hughes, Mathew (Mat), Kun Fu, Louise Scholes and Fangcheng Tang

Technology in Society, 2023, vol. 73, issue C

Abstract: Crowdfunding provides many opportunities for the development of society by supporting entrepreneurial and innovative activities. This article concerns equity crowdfunding syndicates; innovative entrepreneurial financing that introduces professional lead investors to online platforms. Equity crowdfunding syndicates facilitate crowdfunding by mitigating the information asymmetry between crowd investors and entrepreneurs. Based on a multidimensional view of trustworthiness, we investigate the effects of lead investors' integrity, ability, and benevolence on their funding performance. Focusing our analysis on data from a sample of 179 lead investors on AngelList, a world-leading equity crowdfunding platform in the U.S., we find that lead investors’ integrity and ability are, as predicted, positively associated with their funding performance. However, we do not find a significant effect from benevolence. The results also show that the investment-specific human capital of lead investors moderates the effect of integrity on their funding performance. Our study contributes to the crowdfunding literature by providing insights into the multidimensional trustworthiness of a capital provider in determining funding performance. It also contributes to the under-researched area of technological innovation since a crowdfunding syndicate is an alternative means of financing for entrepreneurs.

Keywords: Trust; Trustworthiness; Equity crowdfunding; Human capital; Lead investor; Entrepreneurial finance; Syndicates; Benevolence; Integrity (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:teinso:v:73:y:2023:i:c:s0160791x23000271

DOI: 10.1016/j.techsoc.2023.102222

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