With a Little Help from Friends: Strategic Financing and the Crowd
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AbstractBased on a crowdfunding platform and social media account login data, we study the information role of financing from connected individuals (e.g., family and friends) of entrepreneurs. While financing from connected individuals is generally considered as a signal of high-quality projects, our results suggest that this might be a signal of funding performance manipulation. Entrepreneurs with moderate early funding performance strategically solicit investments from friends to encourage naïve investors to herd. Sophisticated investors discern manipulation and are less likely to invest. Manipulation exists even when sophisticated investors have significant market power and projects with manipulation deliver poorer funding performance.
Acceptance Date30/04/2020
All Author(s) ListSudipto Dasgupta, Tingting Fan, Yiwei Li, Yizhou Xiao
Name of ConferenceCambridge Centre for Alternative Finance Annual Conference
Start Date of Conference30/04/2020
End Date of Conference30/04/2020
Place of ConferenceOnline Conference
Country/Region of ConferenceGreat Britain
Year2020
Month4
LanguagesEnglish-United States

Last updated on 2020-16-12 at 11:42