With a Little Help from Friends: Strategic Financing and the Crowd
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CUHK Authors
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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 Date03/02/2020
All Author(s) ListSudipto Dasgupta, Tingting Fan, Yiwei Li, Yizhou Xiao
Name of ConferenceMarketing Analytics Symposium, Sydney (MASS)
Start Date of Conference03/02/2020
End Date of Conference04/02/2020
Place of ConferenceSydney
Country/Region of ConferenceAustralia
Year2020
Month2
LanguagesEnglish-United States
