Ignorance is bliss? Information and risk on crowdfunding platforms

Abstract

This research examines the determinants of project success on crowdfunding platforms within a competitive context. We focus on the specific horizontal attributes of the project–attributes that do not affect the project returns but over which investors may have heterogeneous preferences–and on the project returns’ risk level. We run a laboratory experiment with several set-ups, where multiple projects compete for funding simultaneously and where potential investors operate in a quasi-continuous time. We find the horizontal attributes’ information affects project selection, while the risk level of the project returns affects the amount of collected funding.

Gender effects in crowdfunded business loan campaigns

“…As said, investors gather information on the creditworthiness of the borrower by observing the lending behavior of their peers [ 16 ], and take the level of previous funding as a positive signal for their own investment decision [ 29 ]. In a crowdfunding setting, entrepreneurs have the opportunity to provide as much (soft)information as they desire [ 32 , 82 ], which decreases the level of asymmetric information beyond what is commonly feasible in traditional lending markets. This will benefit female entrepreneurs relatively more than their male counterparts.…”

“…Given the asymmetric information and the high level of uncertainty involved in peer-to-peer loans, investors in loan-based crowdfunding are likely to take the behavior of their fellow investors into consideration when making their investment decision. Increasing the level of available information may therefore reduce investor uncertainty about borrowers, and may weaken the need to herd [ 16 , 82 ].…”

Assessment of blockchain’s impact on crowdfunding

“…Furthermore, the perceived risks from the perspective of the funding object, project initiator, and intermediary (Appio et al, 2023;Chen et al, 2023;D'Arcangelo et al, 2023;Senney & Lhost, 2023;Shrestha et al, 2023) were discussed. Also, these risks were compared between e-commerce and crowdfunding.…”

“…Lukkarinen et al, 2016;Drabløs, 2015;Burtch et al, 2013;Frydrych et al, 2014;Mollick, 2014;Ferreira & Pereira, 2018;Kuppuswamy and Bayus, 2013;Cumming et al, 2020 Lukkarinen et al, 2016;Drabløs, 2015;Burtch et al, 2013;Macmillan et al, 1985;Sudek, 2007;Streletzki and Schulte, 2013;Prowse, 1998;Anthony, 2011;EBAN, 2014;Zhu et al, 2023;Huang et al, 2023 Concept rating how well the product fits the target market Lukkarinen et al, 2016;Block et al, 2017;Macmillan et al, 1985;Sudek, 2007;Streletzki and Schulte, 2013;Prowse, 1998;Anthony, 2011;EBAN, 2014;Zhu et al, 2023;Huang et Hong and Cha (2013); Shrestha et al, 2023;F. Chen et al, 2023;Senney & Lhost, 2023;Appio et al, 2023;D'Arcangelo et al, 2023;…”