A sense of risk: Responses to crowdfunding risk disclosures

Prabal Shrestha, James Thewissen, Özgür Arslan-Ayaydin and Annaleena Parhankangas
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Prabal Shrestha: Université catholique de Louvain, LIDAM/LFIN, Belgium

No 2024016, LIDAM Reprints LFIN from Université catholique de Louvain, Louvain Finance (LFIN)

Abstract: This paper examines how reward-based crowdfunding backers respond to risk disclosures. Combining theoretical frameworks from financial accounting with the risk perception literature, we adopt an abductive research approach to explore various nuances that influence backers' tolerance for risk information. In addition to identifying the general dynamics in backers' risk interpretation, we highlight the complexities introduced by differences in the disclosure's semantic content, expressed feelings, and the discloser's background attributes. Relying on a hierarchical Bayesian mixture model, we first identify a positive curvilinear relationship between risk information quantity and crowdfunding success. We then demonstrate the influences of what is disclosed, how it is disclosed, and who discloses it, while emphasizing the context-bound specificities of individual project types.

Keywords: Bayesian analysis; crowdfunding; mandatory risk disclosure; risk perception; textual analysis (search for similar items in EconPapers)
Pages: 46
Date: 2024-01-01
Note: In: Strategic Entrepreneurship Journal, 2023, vol. 17(4), p. 925-970
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Persistent link: https://EconPapers.repec.org/RePEc:ajf:louvlr:2024016

DOI: 10.1002/sej.1480

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