Home Bias in Online Investments: An Empirical Study of an Online Crowdfunding Market

Mingfeng Lin () and Siva Viswanathan ()
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Mingfeng Lin: Department of Management Information Systems, Eller College of Management, University of Arizona, Tucson, Arizona 85721
Siva Viswanathan: Decision, Operations and Information Technologies, Robert H. Smith School of Business, University of Maryland, College Park, Maryland 20742

Management Science, 2016, vol. 62, issue 5, 1393-1414

Abstract: An extensive literature in economics and finance has documented home bias , the tendency that transactions are more likely to occur between parties in the same geographical area rather than outside. Using data from a large online crowdfunding marketplace and employing a quasi-experimental design, we find evidence that home bias still exists in this virtual marketplace for financial products. Furthermore, through a series of empirical tests, we show that rationality-based explanations cannot fully explain such behavior and that behavioral reasons at least partially drive this remarkable phenomenon. As crowdfunding becomes an alternative and increasingly appealing channel for financing, a better understanding of home bias in this new context provides important managerial, practical, and policy implications. This paper was accepted by Lee Fleming, entrepreneurship and innovation .

Keywords: home bias; peer-to-peer lending; quasi-experiment; crowdfunding; behavioral explanations; natural experiment (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (104)

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