This paper makes two contributions to research on the new entrepreneurial finance context of equity crowdfunding. First, we compare its regulation around the world and discuss how this impacts the ...development of markets. Second, we investigate the signaling role played toward external investors by equity retention and social capital. Using a sample of 271 projects listed on the UK platforms Crowdcube and Seedrs in the period 2011-2014, we find that campaigns launched by entrepreneurs (1) who sold smaller fraction of their companies at listing and (2) had more social capital had higher probabilities of success. Our results combine findings in classical entrepreneurial finance settings, like venture capital and IPOs, with evidence from other, non-equity crowdfunding markets.
Finance studies on information cascades, usually in an initial public offering setting, typically differentiate between institutional and retail investors, as this is the only information available ...to potential backers. Information available through equity crowdfunding platforms includes details on individual investors as they may disclose information about themselves by linking their profile to social networks or websites. Using a sample of 132 equity offerings on Crowdcube in 2014, we show that information cascades among individual investors play a crucial role in crowdfunding campaigns. Investors with a public profile increase the appeal of the offer among early investors, who in turn attract late investors.
Full text
Available for:
BFBNIB, FZAB, GIS, IJS, KILJ, NUK, OILJ, SAZU, SBCE, SBMB, UKNU, UL, UM, UPUK
3.
The geography of initial coin offerings Huang, Winifred; Meoli, Michele; Vismara, Silvio
Small business economics,
06/2020, Volume:
55, Issue:
1
Journal Article
Peer reviewed
Open access
Initial coin offerings (ICOs) are a rapidly growing phenomenon wherein entrepreneurial ventures raise funds for the development of blockchain-based businesses. Although they have recently sprouted up ...all over the world, raising millions of dollars for earlystage firms, few empirical studies are available to help understand the emergence of ICOs across countries. Based on the population of 915 ICOs issued in 187 countries between January 2017 and March 2018, our study reveals that ICOs take place more frequently in countries with developed financial systems, public equity markets, and advanced digital technologies. The availability of investment-based crowdfunding platforms is also positively associated with the emergence of ICOs, while debt and private equity markets do not provide similar effects. Countries with ICO-friendly regulations have more ICOs, whereas tax regimes are not clearly related to ICOs.
This paper investigates whether gender, age, ethnicity, and geography affect the choice of equity crowdfunding offerings vs initial public offerings (IPO) on traditional stock markets and whether ...these characteristics increase the likelihood of a successful offering. Using 167 equity offerings in Crowdcube and 99 equity offerings on London’s Alternative Investment Market raising between £300,000 and £5 m, we find that companies with younger top management team (TMT) members are both more likely to launch equity crowdfunding offerings than IPOs and have higher chances to successfully complete an equity crowdfunding offering. Remotely located companies are more likely to launch equity crowdfunding offerings than IPOs and have higher chances to successfully complete an equity crowdfunding offering. On the contrary, female entrepreneurs do not have higher chances to raise funds in equity crowdfunding. Minority entrepreneurs do not have higher chances of successfully raising capital but do attract a higher number of investors. Overall, our evidence provides empirical guidance for the first time to the oft-repeated policy claim that equity crowdfunding democratizes entrepreneurial finance by providing access to funding to underrepresented groups of potential entrepreneurs.
Full text
Available for:
CEKLJ, EMUNI, FIS, FZAB, GEOZS, GIS, IJS, IMTLJ, KILJ, KISLJ, MFDPS, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, SBMB, SBNM, UKNU, UL, UM, UPUK, VKSCE, ZAGLJ
There are competing theoretical explanations and conflicting empirical evidence for the initial public offering (IPO) underpricing phenomenon in family firms. The behavioral agency model predicts ...that loss-averse family firms discount their shares more than nonfamily firms to minimize losses of socioemotional wealth (SEW). Conversely, the endowment effect in prospect theory suggests that family owners maximize their financial wealth (FW) by including SEW in perceptions of firm value and demanding a higher IPO price to relinquish it. We reconcile these seemingly incompatible predictions by examining dynamic properties of the reference point in decision framing. Conceiving IPO pricing as a two-stage gamble, we theorize that initial SEW losses entailed by the listing decision increase the disposition of family owners to underprice IPO shares to possibly offset these losses, or “break even.” We thereby advance the behavioral agency model with the aversion to loss realization logic to explain how family owners’ decision frames and preferences change during the IPO process, depending on initial losses of current SEW and new expectations of future SEW. Our analysis of 1,807 IPOs in Europe supports our theoretical expectations, clarifying the trade-off between FW and SEW and explicating the dynamic properties of mixed gambles in family firms.
Full text
Available for:
BFBNIB, IZUM, KILJ, NMLJ, NUK, PILJ, PNG, SAZU, UL, UM, UPUK
The literature on academic entrepreneurship typically assumes that creating a supportive environment in a university can result in a higher rate of establishment of academic spin-offs in a relatively ...straightforward manner. In contrast, we argue that, at times, academics choose to launch an independent company vis-à-vis pursuing alternative business engagement activities when their university provides inadequate support. Drawing from hybrid entrepreneurship and necessity entrepreneurship, we model the individual decision to spin-off as a reaction to the organizational characteristics of the parent university, rather than to its outcome. Through a longitudinal study of 559 spin-offs from 85 Italian universities from 1999 to 2013, we find that although stronger administrative support from the parent university leads academics to create more technology spin-offs, a U-shaped relationship instead exists between the number of administrative staff within a university and the rate of establishment of non-technology spin-offs. When the level of administrative staff is too low or too high relative to the fitted amount estimated using several university-level factors, academic staff reacts by establishing firms to achieve improved cash and human resource management.
Little is known about what happens after an unsuccessful equity crowdfunding campaign. Taking a socioemotional wealth perspective, we hypothesize that family business start-ups are more likely to ...eventually still raise equity financing relative to nonfamily business start-ups. Moreover, while family business start-ups are initially less likely to provide voting rights, we hypothesize that they are more likely to offer shares with voting rights after an unsuccessful campaign. Using data on the UK equity crowdfunding market, we find support for our hypotheses. This study adds novel insights into the nexus between equity crowdfunding and family business literature.
Full text
Available for:
BFBNIB, FZAB, GIS, IJS, KILJ, NUK, OILJ, SAZU, SBCE, SBMB, UKNU, UL, UM, UPUK
In contemporary higher education systems, funding is increasingly associated with performativity, assessment, and competition, and universities are seeking different forms of financing their ...activities. One of these new forms is crowdfunding, a tool enabled by the digitalization of finance. Based on data from the UK higher education system and two crowdfunding platforms, our study adds to previous crowdfunding research in academic settings that have, thus far, focused on research projects, and assesses who is participating, their level of engagement and the resources they have gathered from crowdfunding. Our findings show that crowdfunding is used more by universities that have fewer resources. These universities are more teaching-oriented, less prestigious, and have a student body largely derived from lower socio-economic sectors of society. The popularity of crowdfunding in this type of university suggests that crowdfunding may enhance the democratization of higher education funding. However, as optimal crowdfunding participation and engagement requires high academic-to-student ratios and total-staff-to-academic-staff ratios, universities facing a greater financial precarity may be disadvantaged in their access to and engagement with crowdfunding. Differentials between part-time and full-time student ratios may exacerbate this disadvantage. Our study suggests that crowdfunding is a viable means of obtaining additional financing for learning activities complementing the fundings from other sources, but raises concerns about the use of crowdfunding as a burden to academics and students to find resources to meet learning experiences that ought to be provided by universities in the first place.
Full text
Available for:
CEKLJ, DOBA, EMUNI, FIS, FZAB, GEOZS, GIS, IJS, IMTLJ, IZUM, KILJ, KISLJ, MFDPS, NLZOH, NUK, OILJ, PILJ, PNG, SAZU, SBCE, SBJE, SBMB, SBNM, SIK, UILJ, UKNU, UL, UM, UPUK, VKSCE, ZAGLJ
Research Question/Issue
This study investigates the relationship between financial literacy and the survival profile of the security‐based crowdfunding platforms. Security‐based crowdfunding has ...recently emerged as a novel market that allows small investors to engage directly in financing entrepreneurial ventures. However, a certain level of financial literacy is required to understand and manage these digital finance tools. A better understanding of the impact of financial literacy is, therefore, central to the development of these markets and the achievement of their inclusive potential.
Research Findings/Insights
Using data of the universe of 432 security‐based crowdfunding platforms in 37 OECD countries from 2007 to 2019, we find higher platforms' survival profiles where the level of financial literacy is high. Financial literacy, however, needs to combine with specific platform characteristics to take full effect, as it matters more to those platforms that deliver voting rights and that provide poorer value‐added services to crowdfunding investors.
Theoretical/Academic Implications
This study provides empirical support to the role of governance mechanisms at the platform level for differences in the level of financial literacy across countries. As such, it contributes to literature both on financial literacy and corporate governance. Additionally, it extends previous research in crowdfunding to the platform level.
Practitioner/Policy Implications
This study calls for the attention of policymakers interested in the development of crowdfunding markets. The importance of financial literacy varies with the presence of governance mechanisms and information production at the platform‐level.
Full text
Available for:
BFBNIB, FZAB, GIS, IJS, IZUM, KILJ, NLZOH, NUK, OILJ, PILJ, SAZU, SBCE, SBMB, UL, UM, UPUK
Existing studies on the relationship between sustainability and crowdfunding are focused on campaigns that provide rewards for backers. Equity crowdfunding is substantially different in terms of ...motivations to invest as well as in size, horizon, and expectations of the investment. For the first time – using a sample of 345 initial equity offerings in United Kingdom platforms Crowdcube and Seedrs in the period 2014–2015 – this study provides evidence of the attractiveness of sustainability-oriented ventures in equity crowdfunding. Results show that, although sustainability orientation does not increase the chances of success or of engaging professional investors, it attracts a higher number of restricted investors. This evidence is interpreted considering institutional logic, whereas professionals follow a market logic, and restricted investors consider also a community logic.
•We study the population of initial equity offerings in Crowdcube and Seedrs in the period 2014–2015.•Sustainability orientation does not increase the chances of success of crowdfunding campaigns.•Sustainability orientation does not increase the chances of engaging professional investors.•Sustainability orientation attracts a higher number of restricted investors.•Whereas professional investors follow a market logic, restricted investors consider also a community logic.
Full text
Available for:
GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
PDF
