The Impact of Lead Investors on Retail Investment Decisions in Equity Crowdfunding

Mukunthan Nadarajah, Carolin Bock, Sven Siebeneicher and Diemo Urbig

Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL)

Abstract: Equity crowdfunding offers a crucial funding source for small businesses, enabling access to capital from a broad base of retail investors. However, retail investors often lack sufficient information, leading to uncertainty that can undermine campaign success. This study investigates how lead investors influence retail investor behavior on crowdfunding platforms, drawing on signaling and social capital theories. We analyze data from Companisto, a German equity crowdfunding platform, to explore how lead investors' social capital through cognitive, structural, and relational dimensions affects retail decisions. For example, large investments by lead investors serve as "costly signals" of quality, fostering trust and reducing uncertainty. Additionally, public profiles as structural social capital enhance transparency and encourage retail investor engagement. Interestingly, relational social capital may sometimes negatively affect retail decisions by suggesting exclusivity. These findings offer actionable insights for small businesses and platforms to optimize lead investor signals and improve campaign outcomes.

Date: 2025-06-17
Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/159185/
References: Add references at CitEc
Citations:

Published in Academy of Management Proceedings 1 (2025-06-17)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:dar:wpaper:159185

Access Statistics for this paper

More papers in Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL) Contact information at EDIRC.
Bibliographic data for series maintained by Dekanatssekretariat ().