Investors’ choices between cash and voting rights: Evidence from dual-class equity crowdfunding

By Douglas J. Cumming, M. Meoli, Silvio Vismara. Research Policy, 2019

222 citations recorded by the source corpus.

Abstract This paper examines for the first time dual-class equity crowdfunding as a digital ownership model. Unique to this context, companies can set an investment threshold under which no voting rights are granted, making the issuance of Class A vs. Class B shares, depending on individual investors. Using a sample of 491 offerings on the UK platform Crowdcube from 2011 to 2015, we find that a higher separation between ownership and control rights lowers the probability of success of the offering, the likelihood of attracting professional investors, as well as the long-run prospects. Different from small investors, professional investors care about the implementation of a threshold for the attribution of voting rights and often bid the Class A threshold exactly. Family businesses, although less attractive to small investors, are relatively safer investments, because of their lower chances of failure.

Subfields: Accounting, Economics and Econometrics, Management Information Systems

View Paper: https://www.semanticscholar.org/paper/e75c3f14383a6ec243d8d4f4ff3911f4982606d1

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Citations in the corpus

Crowdfunding and social capital: A systematic review using a dynamic perspective (2021, background): “Several studies investigate how projects ’ performance in equity crowdfunding affects their probability of receiving follow-up W. Cai et al. investments (Cumming et al., 2019; Signori and Vismara, 2018); however, they ignore the role of social capital.”
The digital transformation of innovation and entrepreneurship: Progress, challenges and key themes (2019, background): “Three papers explore dimensions of digitization associated with crowdfunding (Cumming et al., 2019; Wang et al., 2019; Eiteneyer et al., 2019).”
Equity crowdfunding: First resort or last resort? (2017, methodology): “However, contrary to many projects on reward-based crowdfunding platforms, which tend to be artistic and often are not associated with an entrepreneurial firm, projects on equity crowdfunding platforms by definition relate to firms (Cumming et al., 2016).”
Equity Crowdfunding and Governance: Toward an Integrative Model and Research Agenda (2019, unknown): “This type of hypothetical investment—before an actual equity crowdfunding campaign—has been met with much regulatory debate in the U.S. 5 But there is a history of such a policy, for instance, on the WiSEED equity crowdfunding platform in France (Cumming et al., 2017b).”