Does the Role of Media and Founder’s Past Success Mitigate the Problem of Information Asymmetry? Evidence from a UK Crowdfunding Platform

Success or failure in equity crowdfunding? A systematic literature review and research perspectives

Purpose

This paper aims to provide a multidisciplinary framework that allows an integrated understanding of reasons of success or failure in equity crowdfunding (ECF), a Fintech digital innovation of the traditional entrepreneurial finance, defining a future research agenda.

Design/methodology/approach

A systematic literature review (SLR) has been conducted on 127 documents extracted from two multidisciplinary repositories (Elsevier’s Scopus and Clarivate Analytics Web of Science) for the period between 2015 and early 2022. After a systematized series of inclusion and exclusion criteria, in line with the objectives and conceptual boundaries, a final list of 32 peer-reviewed articles written in English was analyzed by the authors through a meta-synthesis and thematic analysis to identify the key themes and dominant concepts.

Findings

Results show that the body of literature is recent and fast growing. The proposed integrative framework of existing research indicates that the outcome of an ECF campaign is related to signals conveyed by entrepreneurs in the form of hard information (firm characteristics, financial information, business characteristics and project description) and soft information (intellectual capital, human capital, social capital and social media network), catalyzed by digital media that facilitate also personal interactions between entrepreneurs and investors. Similarly, external factors (investors and campaign characteristics, with the fundamental role of ECF platform managers in building trust between entrepreneurs and investors) allow for the alleviation of information asymmetries. The present study sheds light on which signal mechanisms are decisive in improving the outcome, taking into consideration various disciplines which follow different but complementary perspectives.

Practical implications

Entrepreneurs should adapt to the transition toward the digital era, exploiting alternative financial instruments and learning effective signaling strategies, within a large variety of skills requested. Platform managers can obtain more focused information on selected entrepreneurial projects more efficiently.

Originality/value

Although it is fast-growing, the field of research is very recent, still fragmented and limited to the perspective/discipline followed. This SLR is, to the best of the authors’ knowledge, the first multidisciplinary and integrative analysis of reasons that motivates success, or failure, of an equity-based crowdfunding campaign. The digital nature of ECF encourages future research to move toward more pioneering and unconventional theories and research methods. Hence, the authors add to the existing literature by proposing future patterns of research based on an integration of highly technological skills and behavioral/psychological approaches.

The Influence of Signals on Donation Crowdfunding Campaign Success during COVID-19 Crisis

In 2020, the coronavirus pandemic devasted public health agencies and the federal government across the world. Bridging the gap between underserved populations and the healthcare system, the donation-based crowdfunding campaign has opened a new way for suffering individuals and families to access broader social network platforms for financial and non-financial assistance. Despite the growing popularity of crowdfunding during the pandemic crisis, little research has explored the various signals that attract potential donors to donate. This study explores the effects of signaling theory on the success of a crowdfunding campaign for food relief launched in GoFundMe during which the United States was severely affected by the pandemic with a surged number of coronavirus infected cases from 1 March with 134 confirmed COVID-19 infected cases to 29 July with 4,295,308 infected cases according to World Health Organization. The following results show that the three different signal success measures are important to the success of crowdfunding campaigns: (1) signals originating from the campaign (Title, Description, Spelling Error, Location, and Picture); (2) signals originating from the fundraiser (Social Network, and Update); and (3) signals originating from the social interaction of the fundraiser with the crowd (Comment, Follower, and Share). These findings provide insight and bring additional knowledge contribution to the crowdfunding literature.

The Effect and Impact of Signals on Investing Decisions in Reward-Based Crowdfunding: A Comparative Study of China and the United Kingdom

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.

Sustainability and Real Estate Crowdfunding: Success Factors

The objective of this paper is to analyze the factors influencing the success of real estate crowdfunding projects in Spain. This type of crowdfunding invests in real estate assets. We analyzed 60 projects published on the Housers platform, a kind of participative platform that uses the lending and equity crowdfunding modalities. These projects have involved around 36,623 investment decisions and have raised a total amount of almost 26 million euros. The empirical analysis is based on ordinary least squares and negative binomial regression. Our main findings reveal that success differs depending on the type of project; in fact, buy-to-sell projects are less successful than development loan projects. In addition, while total return has a positive impact on project success, in the case of risk level and project term, the impact is negative.

Research on the Effects of Information Description on Crowdfunding Success within a Sustainable Economy—The Perspective of Information Communication

Crowdfunding has been widely used by small and micro enterprises, which can raise funds through launching a project in crowdfunding platform. It is also beneficial to sustainable financing. What is more, the success of crowdfunding projects facilitates the sustainable development of those growing enterprises. In this study, from the perspective of information communication and based on information asymmetry and signaling theory, we identify three dimensions of information description, including information quantity (word count, picture count and video count), information attitude (as measured by comment), and information quality (readability and update). We empirically examine their direct effects on crowdfunding success and the moderating effect of information attitude using binary logistic regression. Data (N = 7207) is collected from Kickstarter, a popular crowdfunding platform. The results reveal that when considering these three dimensions of information description together, word count is associated with crowdfunding success in an inverted-U shape. Picture count, video count, comment, and update have positive effects on crowdfunding success. In contrast, readability is negatively related to crowdfunding success. In addition, we find that comment negatively moderates the effect of picture count on crowdfunding success. These findings show the significance of information description on crowdfunding success, bringing theoretical and practical insights for project creators.

The effects of creator credibility and backer endorsement in donation crowdfunding campaigns success

Purpose

The purpose of this paper is to investigate the effects of creator credibility and backer endorsement on the levels of donation to crowdfunding campaigns in a focal muslim community and to determine the success factors of projects in developing and developed countries.

Design/methodology/approach

This research adopts a quantitative approach, utilizing 223 crowdfunding projects from LaunchGood to examine the expected connections. The crowdfunding projects in the distinctive data set (Ramadan) are similar, permitting exploration of the role of creator credibility and backer endorsement in a unique context of religious-based crowdfunding activity.

Findings

Creators’ credibility and backers’ endorsements are decisive factors in crowdfunding success. Results from an additional test related to location (developing and developed countries) suggest that creators’ credibility is more important than backers’ endorsements, especially in developing countries.

Research limitations/implications

The projects used in the data set are homogenous and take place in a specific context. The limited number of available observations influences the testing function and capacity of the models and variables. Further, the investigation is related to a specific community, so might not be applicable to all communities.

Social implications

Potential supporters from the community are vital for the success of crowdfunding projects. This study informs campaign efforts in a religious community by stressing the importance of creators’ credibility and backers’ endorsements. The study also sheds light on factors that affect crowdfunding success in developing and developed countries.

Originality/value

This study helps to explain successful crowdfunding practices in donation-based crowdfunding projects within a religious community context. Results improve scholars’ ability to comprehend individuals’ supporting behavior, providing empirical evidence of creators’ credibility and backers’ endorsement on project success. The study also addresses the determinants of crowdfunding success in developing and developed countries.

Dynamic Incentive Mechanism Design for Recycling Construction and Demolition Waste under Dual Information Asymmetry

The generation of construction and demolition waste (CDW) is a problem for societies aspiring to sustainability. In this regard, governments have the responsibility to support the CDW recycling through subsidies. However, the information asymmetry, as well as the “dynamic nature” of the CDW recycling market, results in a number of barriers for the government to promote CDW recycling. In this paper, we establish a mathematical model that includes the government and the recycling enterprise in the presence of dual information asymmetry including the unknown recycling technology level and unobservable recycling efforts in one-stage and two-stage cooperation. Using the incentive theory, the static and dynamic optimal recycling incentive contracts of the government were designed, and the optimal decisions of the recycler were identified. A numerical simulation revealed that by designing reasonable contracts, the government can encourage the recycler to report the true technical level and achieve information screening. Furthermore, the subsidy of the high-tech recycler remained unchanged under different circumstances. However, the subsidy of the low-tech recycler was closely related to the probability of misreporting and the proportion of technology types. This finding suggests that the government and recycler are inclined towards long-term dynamic cooperation.