Quality revealing versus overstating in equity crowdfunding

Expanding corporate finance perspectives to equity crowdfunding

“…However, they find no evidence that these rights affect campaign outcome, the likelihood of securing follow-on funding, or the insolvency likelihood of the venture. Johan and Zhang ( 2020 ) study the impact of qualitative business information on mitigating information asymmetry between equity crowdfunding entrepreneurs and investors. They find that more detailed disclosure of qualitative business information leads to better fundraising outcomes, while entrepreneurs’ excessive use of promotional language, or self-praise on business quality without factual support, is not rewarded by sophisticated investors.…”

From self‐entertainment to being appreciated: how does social media transfer talent to business?

“…Self-praise for the quality of the business without factual evidence has not been reciprocated by sophisticated investors (Johan and Zhang, 2020), but ordinary investors have less resistance to pitch language because music crowdfunding tends to target average fans with little investment experience, so music crowdfunding projects often rely heavily on the participation of fans who form the most enthusiastic fundraiser group and are similar to members of a brand community Kim, 2016, 2018). Individuals or organisations participate in social media because they believe that posts, friendships and sharing of such disclosures can lead to new resources, tangible or intangible (Saxton and Guo, 2020).…”

“…The music crowdfunding model alleviates information asymmetry between entrepreneurs and investors by utilising qualitative information disclosure. Qualitative information will have a greater impact on financing if it is more specific and detailed (Johan and Zhang, 2020). Therefore, the perception of social media by project managers or fundraisers plays a mediating role between entrepreneurial orientation and crowdfunding success (Sahaym et al, 2021).…”

“…have a significant impact on the trust of potential investors, thereby affecting the performance of crowdfunding (Liang et al, 2019). Displaying pictures related to the details of the crowdfunding projects on the homepage also has a positive impact on the funding rate and an extra picture raises the funding rate by nearly 0.9 percent since detailed project information disclosure can lead to a better crowdfunding result (Johan and Zhang, 2020). In addition, the reliability of the project, such as the crowdfunding experience of fundraisers, also has a positive impact on crowdfunding performance (Liu et al, 2020).…”

“…As most of the fundraisers of music crowdfunding are young people who lack credibility in the market, they will face the suspicion of supporters. While projects initiated by musical teams (group projects) will provide more information than those initiated by individuals, additionally provided information representing a high reputation is sent to the market, which makes it easier for them to succeed (Johan and Zhang, 2020). But for individuals, they need social media account disclosure to provide a digital reputation for improving the funding rate.…”