A Capital User’s Perspective on Crowdfunding Efficiency

76 Pages Posted: 17 Aug 2016 Last revised: 11 Aug 2019

See all articles by Oleg Chuprinin

Oleg Chuprinin

UNSW; Financial Research Network (FIRN)

Maggie Hu

The Chinese University of Hong Kong

Chang Mo Kang

Hanyang University - School of Business

Date Written: August 1, 2019

Abstract

We study how funding dynamics in a crowdfunding market affect capital users who seek to minimize underfunding risk. Our model shows that entrepreneurs benefit from market transparency if the information on the project is sufficiently heterogeneous or the entrepreneur is not too averse to funding uncertainty. However, the appeal of transparent markets to high-quality entrepreneurs is sensitive to funding restrictions. Using micro-level data on investment contributions from a large crowdfunding platform, we find evidence consistent with the model’s predictions. Overall, we identify the key relationships between characteristics of crowdfunding markets and entrepreneurs’ preferences. Our results highlight competitive advantages and risks for crowdfunding platforms and inform the regulatory debate on funding restrictions.

Keywords: crowdfunding, entrepreneurship, investment efficiency

JEL Classification: D83, G11

Suggested Citation

Chuprinin, Oleg and Hu, Maggie and Kang, Chang Mo, A Capital User’s Perspective on Crowdfunding Efficiency (August 1, 2019). Available at SSRN: https://ssrn.com/abstract=2824988 or http://dx.doi.org/10.2139/ssrn.2824988

Oleg Chuprinin (Contact Author)

UNSW ( email )

Room 349, UNSW Business School
High St
UNSW Sydney, NSW 2052
Australia
406674419 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Maggie Hu

The Chinese University of Hong Kong ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Hong Kong, N.T.
Hong Kong

HOME PAGE: http://sites.google.com/site/maggiehuresearch/research

Chang Mo Kang

Hanyang University - School of Business ( email )

222, Wangsimni-ro
Seongdong-gu
Seoul
Korea

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
123
Abstract Views
1,070
rank
273,000
PlumX Metrics