The role of due diligence in crowdfunding platforms

By Douglas J. Cumming, Sofia Johan, Yelin Zhang. Journal of Banking & Finance, 2019

142 citations recorded by the source corpus.

Abstract Crowdfunding platform due diligence comprises background checks, site visits, credit checks, cross-checks, account monitoring, and third party proof on funding projects. We evaluate the factors associated with platforms’ compliance expenses, and their due diligence application. We find that due diligence is related to legislation requirement, platform size, and type or complexity of crowdfunding campaigns. In addition, we find that platforms applying due diligence provide more services to project issuers and funders. Furthermore, due diligence is associated with higher percentage of successful campaigns, more fund contributors, and larger amount of capital raised on platforms. Our analyses are supported by platform-level data, covering the period 2014–2017.

Subfields: Accounting, Economics and Econometrics, Management Information Systems

View Paper: https://www.semanticscholar.org/paper/a9b5a577944ee17d928caf1f33cd468df3b9963d

Citations in the corpus

• What impact does equity crowdfunding have on SME innovation and growth? An empirical study (2019, unknown): “Studies have also examined how investors’ access to a two-sided online social media platform (Cumming and Zhang 2016; Evans and Schmalensee 2016; Rossi and Vismara 2017) can become a market-maker (Estrin et al. 2018).”
• Equity crowdfunding: First resort or last resort? (2017, unknown): “Second, while we provide first-time evidence on firms that searched—successfully or not—for equity crowdfunding and matched firms that did not search for crowdfunding, crowdfunding platforms also perform a selection themselves (e.g., Cumming and Zhang, 2016).”