Signaling in Equity Crowdfunding

By Gerrit K.C. Ahlers, Douglas J. Cumming, Christina Günther, Denis Schweizer. Crowdfunding, 2015

1,404 citations recorded by the source corpus.

This paper presents a first–ever empirical examination of the effectiveness of signals that entrepreneurs use to induce (small) investors to commit financial resources in an equity crowdfunding context. We examine the impact of venture quality (human capital, social [alliance] capital, and intellectual capital) and uncertainty on fundraising success. Our data highlight that retaining equity and providing more detailed information about risks can be interpreted as effective signals and can therefore strongly impact the probability of funding success. Social capital and intellectual capital, by contrast, have little or no impact on funding success. We discuss the implications of our results for theory, future research, and practice.

Subfields: Accounting, Economics and Econometrics, Management Information Systems

View Paper: https://www.semanticscholar.org/paper/0d1787ac1516943c47428a02e24dd73e9a7de7be

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Citations in the corpus

Equity Crowdfunding and Governance: Toward an Integrative Model and Research Agenda (2019, positive): “difficult, informational asymmetry is especially high in the equity crowdfunding context (Ahlers et al., 2015).”
The evolution and adoption of equity crowdfunding: entrepreneur and investor entry into a new market (2018, positive): “From its opening, potential investors are invited to comment on any and every aspect of the pitch—the valuation, the product, the business plan, the market, the entrepreneur and the management team, financial forecasts and the entire business model (Ahlers et al. 2015).”
Equity crowdfunding, shareholder structures, and firm performance (2018, positive): “Finally, the equity crowdfunding context is characterized by significant information asymmetries, where small crowd investors may have limited resources and incentives to perform detailed due diligence and monitoring activities (Ahlers et al., 2015).”
Turning Lead into Gold: How Do Entrepreneurs Mobilize Resources to Exploit Opportunities? (2018, positive): “In the context of equity crowdfunding, founders can retain equity ownership to signal their commitment to the venture, which in turn attracts financial backers (Ahlers, Cumming, G¨unther, & Schweizer, 2015).”
Are Blockchain Crowdsales the New 'Gold Rush'? Success Determinants of Initial Coin Offerings (2018, positive): “However, we also use total amount raised as a complementary success measure (see Ahlers et al., 2015, for a detailed discussion on success measures in crowdfunding campaigns).”
Crowdfunding and social capital: A systematic review using a dynamic perspective (2021, positive): “…giving and public goods (Gordon Burtch et al., 2013; Kuppuswamy and Bayus, 2018), financial crowdfunding research (lending and equity) tends to develop hypotheses through previous finance research, such as signalling (Ahlers et al., 2015; Bapna, 2019) and information cascades (Vismara, 2018).”
Market mechanisms and funding dynamics in equity crowdfunding (2017, positive): “…market (Vulkan et al., 2016; Günther et al., 2017), have analyzed the static factors that affect funding success based on ultimate campaign outcome (Ahlers et al., 2015; Hornuf and Schwienbacher, 2017a), and have provided first insights into the returns on investment (Hornuf and Schmitt, 2016;…”