Financing Efficiency of Securities-Based Crowdfunding

Shaun William Davies

51 citations0/0 files storedReview of Financial Studies

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FinTech, Crowdfunding, Digital Finance Financial Markets and Investment Strategies Private Equity and Venture Capital

Abstract

Abstract We analyze early-venture fundraising from dispersed, endogenously informed investors. An entrepreneur chooses a payoff-maximizing offering, and investors communicate their information by either contributing capital or abstaining. The entrepreneur uses the information conveyed by fundraising amounts to decide whether or not to undertake a risky venture. His decision threshold hedges investors against bad projects, creating a “loser’s blessing” that encourages contributing without information. Making the offering less attractive to investors mitigates the loser’s blessing but can give rise to a winner’s curse. Both tensions reduce financing efficiency. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

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References

1986Why new issues are underpriced 1989How investment bankers determine the offer price and allocation of new issues 1992Sequential Sales, Learning, and Cascades 1980On the aggregation of information in competitive markets 1998Convicting the Innocent: The Inferiority of Unanimous Jury Verdicts under Strategic Voting 1997Voting Behavior and Information Aggregation in Elections With Private Information 2008Manipulation and the Allocational Role of Prices 1989Provision of Public Goods: Fully Implementing the Core through Private Contributions

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2021Innovation-Driven Entrepreneurship 2018Gender difference in equity crowdfunding: an exploratory analysis 2019Donation-based crowdfunding with refund bonuses 2020Inside the Regulatory Sandbox: Effects on Fintech Funding 2023Information Cascades and Threshold Implementation: Theory and an Application to Crowdfunding 2022Theories of Crowdfunding and Token Issues: A Review

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