Financial statement audit and regulatory focus in equity crowdfunding decisions

Regan Stevenson (), Jared Eutsler (), Bradley Lang () and Jesse C. Robertson ()
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Regan Stevenson: Indiana University
Jared Eutsler: University of North Texas
Bradley Lang: Mississippi State University
Jesse C. Robertson: University of North Texas

Small Business Economics, 2025, vol. 64, issue 3, No 15, 1233-1258

Abstract: Abstract Equity crowdfunding (ECF) allows amateur investors to fund startups and small and medium-size enterprises (SMEs). Unlike initial public offerings, ECF requires minimal disclosures, fast-tracking equity raising. ECF's popularity has surged, yet little is known about how assurance services might impact investor decisions. Drawing on regulatory focus theory, we examine how independent assurance, pitch characteristics, and investor regulatory focus influence investment decisions in ECF. Our results support our hypotheses that audits of historical financial information increase ECF investors’ likelihood to invest. Further, interactions between the audit, investors’ regulatory focus, and the regulatory focus of the ECF pitch increase investment such that the presence of an audit increases investment for prevention-focused individuals, and especially the audit is most likely to increase investment for prevention-focused investors when the SME’s pitch is also prevention-focused. Overall, we contribute to literature by exploring the influence of assurance in a new context of ECF, shedding light on previously unexplored aspects of investor decision-making.

Keywords: Assurance; Audit; Equity Crowdfunding; Investors; New Ventures (search for similar items in EconPapers)
JEL-codes: L26 M42 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11187-024-00941-z

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