Topical Collection "Crowdfunding"

Editors

Prof. Dr. Douglas Cumming
E-Mail Website
Guest Editor
College of Business, Florida Atlantic University, Boca Raton, FL 33431, USA
Interests: crowdfunding; venture capital; private equity; hedge funds; law and finance
Prof. Dr. Sofia Johan
E-Mail Website
Guest Editor
College of Business, Florida Atlantic University, 777 Glades Road, Boca Raton, FL 33431, USA
Interests: alternative investments; crowdfunding; venture capital; private equity; hedge funds; sovereign wealth funds; corporate finance; law and finance

Topical Collection Information

Dear Colleagues,

Crowdfunding has grown exponentially in recent years. Soon, the global crowdfunding market will overtake other forms of entrepreneurial finance, such as venture capital. Crowdfunding comprises four main types: donations crowdfunding, rewards crowdfunding, debt crowdfunding (including peer-to-peer (P2P) lending of individuals to individuals and marketplace lending of individuals to firms), and equity crowdfunding. Regulatory changes and scrutiny has significantly affected crowdfunding worldwide, such as the recently expected drops in P2P lending in China due to recent scandals and ensuing regulatory oversight, and growth of equity crowdfunding in the U.S.

Crowdfunding platforms are intermediaries between investors and entrepreneurs. Signaling, due diligence, and different mechanisms used by platforms all have their potential to enable successful crowdfunding. However, the risks of agency problems and fraud are extremely pronounced. To this end, there are significant research opportunities to better understand crowdfunding markets around the world.

The Topical Collection welcomes all types of empirical contributions that pertain to crowdfunding. Other types of papers may be possibly considered subject to their contribution to the theory and knowledge of crowdfunding markets around the world.

Prof. Dr. Douglas Cumming
Prof. Dr. Sofia Johan
Guest Editors

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Keywords

  • Crowdfunding;
  • Entrepreneurial finance;
  • Equity crowdfunding;
  • Rewards crowdfunding;
  • P2P lending;
  • Marketplace lending;
  • Information asymmetries;
  • Moral hazard;
  • Adverse selection;
  • Exit;
  • Crowdfunding fraud;
  • Crowdfunding regulation.

Published Papers (10 papers)

2021

Jump to: 2020

Article
Legitimacy and Reciprocal Altruism in Donation-Based Crowdfunding: Evidence from India
J. Risk Financial Manag. 2021, 14(5), 194; https://doi.org/10.3390/jrfm14050194 - 25 Apr 2021
Viewed by 426
Abstract
The donation-based crowdfunding platforms witness a mix of different entities seeking funding for numerous campaigns, adding complexities in understanding the donor behavior and factors that motivate donation. This study builds upon the economic theory of charitable giving and examines the ethical dilemma that [...] Read more.
The donation-based crowdfunding platforms witness a mix of different entities seeking funding for numerous campaigns, adding complexities in understanding the donor behavior and factors that motivate donation. This study builds upon the economic theory of charitable giving and examines the ethical dilemma that donors face during the selection process. Using the data from Ketto.org, the biggest crowdfunding platform in India, this paper investigates the rank-order preference of donors while making a selection across heterogeneous entities and campaigns. The results show that campaigns run by non-profit organizations registered with causes that qualify for a tax-deduction receive a higher level of funding. Donors then fund unregistered non-profit organizations, followed by campaigns run by individuals. Demonstrating legitimacy by using subtle cues, like tagging “with tax-benefit,” motivates the donors to provide a higher amount of funding. Full article
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Article
Investor Intention in Equity Crowdfunding. Does Trust Matter?
J. Risk Financial Manag. 2021, 14(2), 53; https://doi.org/10.3390/jrfm14020053 - 27 Jan 2021
Viewed by 663
Abstract
Equity crowdfunding (ECF) is becoming a convenient alternative instrument for investing in entrepreneurs’ projects in many countries. The purpose of this study was to investigate the factors that affect the investor’s intentions toward ECF platforms in Saudi Arabia, where they have not been [...] Read more.
Equity crowdfunding (ECF) is becoming a convenient alternative instrument for investing in entrepreneurs’ projects in many countries. The purpose of this study was to investigate the factors that affect the investor’s intentions toward ECF platforms in Saudi Arabia, where they have not been introduced until very recently. This context offers a unique opportunity to test the role of investors’ perceived trust in the context of ECF. The proposed framework builds on two critical layers: (1) trust in the platform (intermediary) and (2) trust in the fundraiser. Structured equation modelling was applied to examine the factors that affect investors’ trust and intentions. The framework was analysed using survey data from 216 users of Manafa, one of the largest ECF platforms in Saudi Arabia. Our findings showed that both fundraiser and platform trust have a significant effect on the investor’s intentions. In particular, trust in the platform substantially impacts the fundraiser’s trust, showing the importance of the fundraiser’s reliance on trusted institutions. On the other hand, to build investors’ trust, fundraisers must deliver high-quality information for their projects. Full article
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Article
Application of the 4Es in Online Crowdfunding Platforms: A Comparative Perspective of Germany and China
J. Risk Financial Manag. 2021, 14(2), 49; https://doi.org/10.3390/jrfm14020049 - 25 Jan 2021
Cited by 1 | Viewed by 980
Abstract
As a dynamic way to raise funds for professional and private projects in recent years, crowdfunding has made tremendous progress, especially through online platforms. However, research on this subject is still young, leaving room for different perspectives. We therefore approach the marketing mix [...] Read more.
As a dynamic way to raise funds for professional and private projects in recent years, crowdfunding has made tremendous progress, especially through online platforms. However, research on this subject is still young, leaving room for different perspectives. We therefore approach the marketing mix adaptability of online crowdfunding platforms and its impact on campaign efficiency and company strategy in two major economies: Germany and China. With the help of case examples based on secondary data, we performed an in-depth analysis of the 4E marketing mix benefits on crowdfunding, highlighting best practice approaches. We critically discuss the 4Es marketing mix approach, focusing on experience, value exchange, and marketing scales, and clarify the compatibility between crowdfunding and 4Es to better understand how these theories are applied to crowdfunding activities. As a result, the suitability of the 4E marketing mix adapted to crowdfunding needs is shown. From a market-oriented perspective, managers of crowdfunding platforms, as well as project owners from Germany and China, will be better able to attract their target audience by applying the 4E adaptation provided. Full article
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2020

Jump to: 2021

Article
Civic Crowdfunding in Local Governments: Variables for Success in the Netherlands?
J. Risk Financial Manag. 2021, 14(1), 8; https://doi.org/10.3390/jrfm14010008 - 25 Dec 2020
Cited by 2 | Viewed by 680
Abstract
By using information technology, local governments can develop alternative forms of citizen engagement. Civic crowdfunding campaigns supported by online platforms enable citizens to participate financially in social projects and can be matched with government funding. As such, an alternative for subsidies seems to [...] Read more.
By using information technology, local governments can develop alternative forms of citizen engagement. Civic crowdfunding campaigns supported by online platforms enable citizens to participate financially in social projects and can be matched with government funding. As such, an alternative for subsidies seems to be developing. In this paper, we assess empirically the success of civic crowdfunding campaigns in the Netherlands by using data collected during 2018 from 269 civic crowdfunding projects and local demographic data from the neighborhoods of these projects. The factors—the use of match-funding, the target amount of money, and the theme of the project, as well as the age structure, the province, and the degree of urbanization of the neighborhood of the civic crowdfunding project—turn out to be empirically related to the success of a civic crowdfunding campaign. Full article
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Article
Predictions of Crowdfunding Campaign Success: The Influence of First Impressions on Accuracy and Positivity
J. Risk Financial Manag. 2020, 13(12), 331; https://doi.org/10.3390/jrfm13120331 - 21 Dec 2020
Viewed by 584
Abstract
Crowdfunding has quickly gained popularity in recent years, providing an additional way for entrepreneurial individuals and organizations (creators) to attract funds for their projects. Scholars have been interested in predicting the success of crowdfunding campaigns, by relating campaign characteristics to the actual success [...] Read more.
Crowdfunding has quickly gained popularity in recent years, providing an additional way for entrepreneurial individuals and organizations (creators) to attract funds for their projects. Scholars have been interested in predicting the success of crowdfunding campaigns, by relating campaign characteristics to the actual success of these campaigns. We take one step back by studying the cognitive processes of the crowd. This paper uses an experimental approach to establish whether participants’ predictions on the success of crowdfunding campaigns based on first impressions are as positive and as accurate as those derived from more thorough analyses. We employ a two-study replication design, in which individuals estimate the success of crowdfunding campaigns in two conditions: with limited time and with unlimited time. The results show that prediction accuracy in both conditions is equal, yet shorter time availability results in assessments that are more negative. We discuss implications for creators and for funders. Full article
Article
Institutional Drivers of Crowdfunding Volumes
J. Risk Financial Manag. 2020, 13(12), 326; https://doi.org/10.3390/jrfm13120326 - 20 Dec 2020
Viewed by 616
Abstract
Crowdfunding improves access to financing, yet cases of crowdfunding’s importance, besides traditional financing, are rare and notably localized. In explaining why global crowdfunding volumes are so heterogeneous, previous academic research has focused mainly on the existence of a legal system that is supportive [...] Read more.
Crowdfunding improves access to financing, yet cases of crowdfunding’s importance, besides traditional financing, are rare and notably localized. In explaining why global crowdfunding volumes are so heterogeneous, previous academic research has focused mainly on the existence of a legal system that is supportive of crowdfunding, but with conflicting results. We argue that a broader range of institutions must be considered to describe the spread of crowdfunding at its current early stage of development, and provide first empirical evidence on the matter. Using a dataset covering crowdfunding volumes of 122 countries over the years 2015–2016, we confirm that the existence of crowdfunding-specific regulations has a positive association with total crowdfunding volumes per capita. We also find that regulation targeted at a specific type of crowdfunding has an economically stronger association with corresponding transaction volumes. In line with our argument, we find that a significantly broader range of less crowdfunding-specific institutions exhibit strong ties to crowdfunding volumes, with strong e-service culture emerging as an especially robust determinant of all types of crowdfunding volumes. Stronger legal rights, greater financial freedom, and higher democracy levels are also associated with greater total crowdfunding volumes, but exhibit varying relevance across different types of crowdfunding. Full article
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Article
The Effect and Impact of Signals on Investing Decisions in Reward-Based Crowdfunding: A Comparative Study of China and the United Kingdom
J. Risk Financial Manag. 2020, 13(12), 325; https://doi.org/10.3390/jrfm13120325 - 19 Dec 2020
Viewed by 707
Abstract
When traditional financial institutions faced difficulties in the task of assisting micro, small and medium-sized enterprises (MSMEs) with capital allocations, crowdfunding can upsurge as an innovative and vibrant vehicle that can support and assist the activity of such MSME’s, by financing their activity [...] Read more.
When traditional financial institutions faced difficulties in the task of assisting micro, small and medium-sized enterprises (MSMEs) with capital allocations, crowdfunding can upsurge as an innovative and vibrant vehicle that can support and assist the activity of such MSME’s, by financing their activity and instrumenting the process of risk-sharing. Simultaneously with its enormous growth and popularity, crowdfunding is faced by several key challenges, one of biggest such challenges referring to the problem of information asymmetry that can exist between fundraisers and potential backers. Based on the signaling theory, a research taxonomy has been developed for a comparative analysis between China and the UK. This has been accomplished by retrieving secondary data from the following crowdfunding platforms: Dreamore (Chinese platform) and Crowdfunder (UK platform). The objective of the study is to investigate both the effect and the impact that signals (goal setting, project comments and updates) have upon mitigating the problem of information asymmetry, in order to make the project successful. We have thus deployed an Ordinary Least Square (OLS) regression and validated the models through a robustness check. The findings reveal that signals actively mitigate the problem of information asymmetry in both countries, but this varies in the sense that higher goal setting has a more positive/impactful relationship with project success in the UK than it does in China. Project comments are more positively associated with project success in China as compared to the UK, whereas project updates are more negatively related to project success in China as compared to the UK. These findings demonstrate the importance that signals have upon successful crowdfunding activities/campaigns, highlighting the theoretical and practical influence and relevance for potential fundraisers in the two aforementioned economies. Full article
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Article
Crowdfunding: An Exploratory Study on Knowledge, Benefits and Barriers Perceived by Young Potential Entrepreneurs
J. Risk Financial Manag. 2020, 13(4), 81; https://doi.org/10.3390/jrfm13040081 - 22 Apr 2020
Cited by 2 | Viewed by 971
Abstract
Crowdfunding (CF) has experienced impressive growth in recent years with the development of internet and information technologies that increased the participation of the “crowd” to fund entrepreneurial projects. Young entrepreneurs, especially well-qualified students, have recently begun to play a new role in the [...] Read more.
Crowdfunding (CF) has experienced impressive growth in recent years with the development of internet and information technologies that increased the participation of the “crowd” to fund entrepreneurial projects. Young entrepreneurs, especially well-qualified students, have recently begun to play a new role in the economy by launching new ventures in niche markets. The aim of the present paper is to provide a deeper understanding of CF among Portuguese young potential entrepreneurs as an alternative funding mechanism, by discussing its main characteristics and the perceived benefits and barriers that might drive young entrepreneurs to post a project on a CF platform or discourage its use. Through an online survey, we query well-qualified students about the knowledge they have about crowdfunding and benefits and barriers that can increase or reduce the possibility of funding to launch a new venture. The results show that potential young entrepreneurs have moderate knowledge about CF. Consequently, they are not able to explore all the business models available, specifically the models related to investment (lending and equity). The respondents perceive several benefits of the use of CF that go beyond the financial advantages, such as the communication of the project to a wider audience and the additional feedback from potential customers. The perceived barriers that could deter the use of CF are related to the implementation of the CF campaign, although contextual constraints have been mentioned. Full article
Article
Gender, Anonymity and Team: What Determines Crowdfunding Success on Kickstarter
J. Risk Financial Manag. 2020, 13(4), 80; https://doi.org/10.3390/jrfm13040080 - 21 Apr 2020
Cited by 5 | Viewed by 1090
Abstract
Crowdfunding allows the public to donate small amounts of money to entrepreneurs through online platforms. In contrast with traditional financial institutions, this new method facilitates the financing process through direct and easy online contact between initiators and investors. Based on the data obtained [...] Read more.
Crowdfunding allows the public to donate small amounts of money to entrepreneurs through online platforms. In contrast with traditional financial institutions, this new method facilitates the financing process through direct and easy online contact between initiators and investors. Based on the data obtained from Kickstarter, the largest crowdfunding platform, we investigate 27,117 crowdfunding projects from 1 January 2015, to 30 June 2015, and we find that a crowdfunding campaign with a realistic funding goal, a suitable funding period, and more updates and interactions with investors is much more likely to be successfully funded. In addition, the different types of founders are very influential in crowdfunding outcomes. For example, females tend to be more successful than males at collecting funds. Founders in the form of teams, companies, or a specific project are also beneficial to funding outcomes. Full article
Article
Crowdfunding in a Competitive Environment
J. Risk Financial Manag. 2020, 13(3), 39; https://doi.org/10.3390/jrfm13030039 - 25 Feb 2020
Cited by 5 | Viewed by 1365
Abstract
Crowdfunding has mostly been used to finance very unique projects. Recently, however, companies have begun using it to finance more traditional products where they compete against other sellers of similar products. Major crowdfunding platforms, Kickstarter and Indiegogo, as well as Amazon have launched [...] Read more.
Crowdfunding has mostly been used to finance very unique projects. Recently, however, companies have begun using it to finance more traditional products where they compete against other sellers of similar products. Major crowdfunding platforms, Kickstarter and Indiegogo, as well as Amazon have launched several projects consistent with this trend. This paper offers a model where two competing firms can use crowdfunding prior to direct sales. The model provides several implications that have not yet been tested e.g., (1) Firms can use crowdfunding strategically to signal a high level of demand for their products; (2) (Reward-based) crowdfunding is procyclical; (3) A higher platform fee may lead to higher firm profits in equilibrium; (4) Competition increases the chances of using crowdfunding compared to the monopoly case; (5) A non-monotonic relationship exists between the risk of crowdfunding campaign failure and firm profit. Full article
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