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Article
Publication date: 7 February 2020

Enrico Battisti, Fabio Creta and Nicola Miglietta

This paper gathers initial evidence about the nature and features of the equity crowdfunding model in Italy, especially in terms of regulations. The purpose of this study…

Abstract

Purpose

This paper gathers initial evidence about the nature and features of the equity crowdfunding model in Italy, especially in terms of regulations. The purpose of this study is to examine how equity crowdfunding might support the real estate sector in Italy.

Design/methodology/approach

To explore the recent initiatives in the development of FinTech in Italy, especially referring to equity crowdfunding’s instrument, a qualitative perspective is used. In particular, this paper relies on primary data from regulations and secondary data from the public domain, which are examined in relation to the current literature.

Findings

The results of this study show that equity crowdfunding represents a funding method that is rapidly increasing in Italy, despite rather rigid regulation. Among the various sectors involved, the real estate sector could benefit from the crowdfunding models and, specifically, from the equity one. The development of new real estate equity crowdfunding portals that allow diversification of investment (by reducing the typical entry barriers for real estate investment) could guarantee greater investment transparency and simplicity.

Practical implications

Real estate crowdfunding can be a simple way to invest in the real estate industry. Thanks to the use of technology, specifically internet-based platforms, this type of crowdfunding allows for small investors, as well as professional investors, to access an asset class otherwise not open to small investment tickets and improve the diversification of investments.

Originality/value

Although recent literature has examined the concept of crowdfunding and highlighted different models, aspects and campaigns, no prior studies, to the authors’ knowledge, have explicitly and jointly investigated, also based on the state of art of regulation, the equity crowdfunding model and the real estate sector in Italy.

Details

Journal of Financial Regulation and Compliance, vol. 28 no. 3
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 3 August 2015

Alexandra Moritz, Joern Block and Eva Lutz

This study’s aim is to investigate the role of investor communication in equity-based crowdfunding. The study explores whether and how investor communication can reduce…

Abstract

Purpose

This study’s aim is to investigate the role of investor communication in equity-based crowdfunding. The study explores whether and how investor communication can reduce information asymmetries between investors and new ventures in equity-based crowdfunding, thereby facilitating the crowd’s investment decisions.

Design/methodology/approach

This paper follows an exploratory qualitative research approach based on semi-structured interviews with 23 market participants in equity-based crowdfunding: 12 investors, 6 new ventures and 5 third parties (mostly platform operators). After analyzing, coding and categorizing the data, this paper developed a theoretical framework and presented it in a set of six propositions.

Findings

The results indicate that the venture’s overall impression – especially perceived sympathy, openness and trustworthiness – is important to reduce perceived information asymmetries of investors in equity-based crowdfunding. To communicate these soft facts, personal communication seems to be replaced by pseudo-personal communication over the Internet (e.g. videos, investor relations channels and social media). In addition, the communications of third parties (e.g. other crowd investors, professional and experienced investors and other external stakeholders) influence the decision-making process of investors in equity-based crowdfunding. Third-party endorsements reduce the perceived information asymmetries and lower the importance of pseudo-personal communications by the venture.

Originality/value

Prior research shows that investor communication reduces information asymmetries between companies and investors. Currently, little is known about the role of investor communication in equity-based crowdfunding. This study focuses on the role of investor communication to reduce the perceived information asymmetries of investors in equity-based crowdfunding.

Details

Qualitative Research in Financial Markets, vol. 7 no. 3
Type: Research Article
ISSN: 1755-4179

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Article
Publication date: 10 February 2021

Bree Dority, Sarah J. Borchers and Suzanne K. Hayes

This study aims to investigate how the language used in US Title II equity crowdfunding campaign descriptions relates to campaign success.

Abstract

Purpose

This study aims to investigate how the language used in US Title II equity crowdfunding campaign descriptions relates to campaign success.

Design/methodology/approach

Data on >3,200 equity offerings from 12 Title II platforms was obtained from 2013 to 2016. The aspects of the campaign descriptions that are focused on are tone and two measures of readability: information quantity – the amount of information available to the investor and information quality – the ease of understanding of the passage of text. Tobit regressions with sector-clustered standard errors are used for estimation while controlling for company-specific variables, market sentiment and platform, regional, sector and time effects. Results are robust to alternative estimation approaches.

Findings

Inverse U-shaped relationships exist between information quantity, information quality and tone and Title II equity crowdfunding campaign success. Overall, less is more as it appears that an intermediate level of information – quantity, quality and tone – is optimal in terms of being a factor that contributes to equity crowdfunding campaign success.

Originality/value

Extends the use of textual analysis to the equity crowdfunding environment in the USA where such analysis is lacking and provides empirical evidence that the language used (e.g. sentiment) in US Title II equity-based crowdfunding campaign descriptions does influence campaign success. It provides empirical evidence of and extends the concept of information overload to the entrepreneurial finance sub-field and indicates tone may be an additional information attribute to consider in this context as contributing to overload.

Details

Studies in Economics and Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 30 November 2020

Antonella Francesca Cicchiello, Amirreza Kazemikhasragh and Stefano Monferrà

The purpose of this paper aims to understand whether gender disparity has an impact on the likelihood of obtaining equity crowdfunding financing in Latin America.

Abstract

Purpose

The purpose of this paper aims to understand whether gender disparity has an impact on the likelihood of obtaining equity crowdfunding financing in Latin America.

Design/methodology/approach

The paper uses a unique database of 492 projects from different equity crowdfunding platforms in Latin America over a period of 2013–2017.

Findings

Results indicate that the involvement of at least one woman in the board of firms seeking equity financing increases campaigns' success significantly. Team gender has no impact on the project's likelihood to experience overfunding.

Originality/value

The paper sheds light on women's access to crowdfunding financing in Latin America, not yet considered so far.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 18 March 2019

Jordan Robert Gamble

The purpose of this paper is to explore the implementation of equity crowdfunding (ECF) within the record industry in terms of challenges and opportunities, in addition to…

Abstract

Purpose

The purpose of this paper is to explore the implementation of equity crowdfunding (ECF) within the record industry in terms of challenges and opportunities, in addition to the marketing and financial implications for independent music artists and major record labels.

Design/methodology/approach

This study adopted a qualitative methodology consisting of two-stage interview-based research methods. A total of 44 semi-structured in-depth interviews were conducted with the CEOs of ECF platforms in the record industry, other related record industry informants, independent artist managers and senior executives from major record labels.

Findings

The loyalty aspect of ECF may have significant marketing potential in terms of inconspicuously using the equity platform as a “prosumer” identification mechanism. As this early career stage of artists is delicate in terms of establishing trust and patronage from their fans, these early marketing and ECF ventures should be implemented directly from the artist without external third-party involvement.

Research limitations/implications

The implications of this paper’s findings and theoretical model are not limited to the two studied stakeholder groups of the record industry. The insights in relation to the obstinate lack of understanding and clarity (particularly for independent artists) which surround ECF are likely to influence short-term strategic approaches by other players throughout the wider music industry.

Practical implications

The insights regarding negative approaches towards ECF by the labels may influence future “coopetition strategies” for independent labels, as they seek to navigate the changing industry dynamics.

Originality/value

This paper is the first study to empirically explore the predominantly under-researched area of ECF implementation in the record industry in terms of marketing and financial consequences for artists and labels.

Details

European Journal of Marketing, vol. 53 no. 3
Type: Research Article
ISSN: 0309-0566

Keywords

Content available
Article
Publication date: 31 March 2020

Giancarlo Giudici, Massimiliano Guerini and Cristina Rossi-Lamastra

The authors investigate whether matchings in equity crowdfunding are more likely to happen if homophily exists between investors and investees. They focus on gender, age…

Abstract

Purpose

The authors investigate whether matchings in equity crowdfunding are more likely to happen if homophily exists between investors and investees. They focus on gender, age and geographical proximity as crucial dimensions of similarity among individuals and thus of homophily. Furthermore, they investigate whether the effect of homophily depends on the risk of opportunism, which investors allegedly attribute to proponents basing on their area of residence.

Design/methodology/approach

The authors analyze a hand-collected database of 13 equity crowdfunding campaigns launched by Italian innovative start-ups from January 2013 to June 2016, which includes information about 384 equity crowdfunding investments carried out by 361 different investors.

Findings

The authors find a significant effect of geographical proximity and age similarity in explaining the probability that an investor finances a campaign. Moreover, these effects are particularly relevant if the proponent is located in areas characterized by a high risk of opportunistic behavior. Interestingly enough, they do not detect any significant effect related to gender.

Originality/value

In this paper, the authors have the unique opportunity to analyze a whole market (the Italian market) during three years, from inception (2013–2016), and to collect the identities of the investors in all successful campaigns.

Details

Baltic Journal of Management, vol. 15 no. 2
Type: Research Article
ISSN: 1746-5265

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Article
Publication date: 4 September 2019

Antonella Francesca Cicchiello

The purpose of this paper is to assess the role that public policies may have in re-shaping entrepreneurial ecosystems and supporting the creation of functioning…

Abstract

Purpose

The purpose of this paper is to assess the role that public policies may have in re-shaping entrepreneurial ecosystems and supporting the creation of functioning ecosystems based on new forms of finance, i.e. the equity-based crowdfunding.

Design/methodology/approach

The paper first identifies and examines the European policies developed to encourage the use of equity crowdfunding in entrepreneurial finance from 2003 to 2018. Then, it reviews national regulatory frameworks for crowdfunding, and analyses the barriers that constrain the growth of national crowdfunding markets. Finally, the paper addresses the issue of regulatory harmonisation by underlining its importance in building an entrepreneurial ecosystem based on crowdfunding.

Findings

Building an entrepreneurial ecosystem based on crowdfunding requires better policy coordination between European countries and readiness to take concerted actions. National authorities must look at the crowdfunding phenomenon from a European perspective and align their policies. European policymakers must import best practices from thriving national ecosystems by implementing less bureaucratic policies and with greater impact on entrepreneurial activity.

Social implications

In a post-crisis economy, the architecture of entrepreneurial ecosystems must evolve and focus on new financing alternatives ensuring the survival of successful businesses.

Originality/value

The paper offers a new perspective on entrepreneurship looking at the formation and development of new ecosystems around equity crowdfunding platforms. It also provides a relevant starting point for subsequent studies into this field.

Details

Journal of Entrepreneurship and Public Policy, vol. 8 no. 3
Type: Research Article
ISSN: 2045-2101

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Article
Publication date: 3 February 2021

Muhammad Shahrul Ifwat Ishak and Md. Habibur Rahman

This paper aims to explore the potential application of mudharabah (silent partnership) as an investment instrument through an Islamic crowdfunding platform.

Abstract

Purpose

This paper aims to explore the potential application of mudharabah (silent partnership) as an investment instrument through an Islamic crowdfunding platform.

Design/methodology/approach

This is a qualitative study in which semi-structured interviews were carried out with several experts regarding the application of mudharabah in Islamic crowdfunding. To achieve the purpose of this study, the data is analysed based on thematic analysis.

Findings

The findings reveal that even though Islamic crowdfunding could be an efficient platform through financial technology (Fintech), mudharabah is not an entirely ideal instrument, particularly for equity-based Islamic crowdfunding because of its high risk. These include fraudulent projects, insufficient regulations to protect investors’ money and the structure of mudharabah itself in which it is in the form of profit-sharing contract. However, the risk can be mitigated by using Fintech as a way to closely monitor the project, enhancing regulatory aspects to protect investment funds, enhancing mudharabah practice and creating awareness among all involving parties in terms of mudharabah philosophy.

Research limitations/implications

This study is limited because it focuses on the current practice of Islamic crowdfunding in Malaysia, given that it is still a new industry. Currently, there is only one Islamic registered equity crowdfunding platform. Also, as the number of interviewees in this study is limited because of purposive sampling, the findings may be considered the result of an exploratory study.

Practical implications

An equity Islamic crowdfunding platform based on mudharabah can be proposed, particularly to support micro enterprises in which they involve small capital. Also, this model can be considered for less risky ventures such as investment in food industries or technology sectors.

Social implications

Mudharabah Islamic crowdfunding model could potentially support local businesses, especially for start-ups. By channelling money among society, it is not only creating a wealth circulation among society, which is one of the Sharīʿah objectives in finance, but it also promotes mutual cooperation and kindness among society members.

Originality/value

While Islamic crowdfunding is not a new topic in research, it lacks empirical studies, particularly qualitative analysis. As this study engages with experts in Sharīʿah and crowdfunding regarding the potential application of mudharabah, it highlights a fresh discussion both in theory and practice.

Details

Qualitative Research in Financial Markets, vol. 13 no. 2
Type: Research Article
ISSN: 1755-4179

Keywords

Content available
Article
Publication date: 15 March 2021

Stefano Cosma, Alessandro Giovanni Grasso, Francesco Pattarin and Alessia Pedrazzoli

A network of partners helps and assists a crowdfunding platform (CFP) in scouting, assessing and selecting projects. This cooperation increases the number of successful…

Abstract

Purpose

A network of partners helps and assists a crowdfunding platform (CFP) in scouting, assessing and selecting projects. This cooperation increases the number of successful projects by attracting a sizable number of investors, proponents and attracting marginal investors when a campaign falls short of the threshold for success. This study examines the role of partner networks in a platform ecosystem, specifically in terms of number of different partners and their diversity in the performance of the crowdfunding campaign.

Design/methodology/approach

Using logistic and linear regressions, we analyze a sample of 233 projects, both funded and not funded, launched by 10 Italian equity CFPs between 2014 and 2018.

Findings

Our findings indicate that the variety of partners in a platform's network influence the probability of campaign success and how much capital the proponent company raises. CFPs are resource-constrained new ventures, and a network with a wider variety of partners ensures the strategic resources and competencies that are required in an early stage market, thus facilitating campaign funding.

Practical implications

The variety of partner networks could help CFPs to offer unique and strategic value propositions and define the competitive positioning of platforms.

Originality/value

This study provides a deeper understanding of the determinants of equity crowdfunding campaign performance by emphasizing the role of CFP's network of partners on the entire crowdfunding ecosystem and its underlying organizational elements.

Details

European Journal of Innovation Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1460-1060

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Book part
Publication date: 28 August 2020

Simona Leonelli, Francesca Di Pietro and Francesca Masciarelli

Crowdfunding campaigns reflect the personality traits of the entrepreneur, influencing the chances of a successful fundraising. In this study, the authors focus on three…

Abstract

Crowdfunding campaigns reflect the personality traits of the entrepreneur, influencing the chances of a successful fundraising. In this study, the authors focus on three different entrepreneurs’ personality dark traits: narcissism, Machiavellianism and psychopathy. Through a text analysis of 338 equity-crowdfunding campaigns in the UK, the authors identified narcissistic expressions used by entrepreneurs in their pitches, and their impact on funding success. The authors found an inverted U-shape relationship between entrepreneurs’ narcissism and the crowdfunding success. On the other hand, entrepreneurs’ psychopathy has a negative linear relationship with crowdfunding success. This study contributes to the entrepreneurship literature, highlighting the importance of displayed entrepreneurs’ personality traits in engaging with crowd investors.

Details

The Entrepreneurial Behaviour: Unveiling the cognitive and emotional aspect of entrepreneurship
Type: Book
ISBN: 978-1-78973-508-6

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