TY - JOUR
T1 - Invest or regret? An empirical investigation into funding dynamics during the final days of equity crowdfunding campaigns
AU - Nguyen, T.
AU - Cox, Joe
AU - Rich, Judy
N1 - Publisher Copyright:
© 2019 Elsevier B.V.
PY - 2019/10
Y1 - 2019/10
N2 - In this study, we use the options theory of investment to investigate the funding behaviour of investors in equity crowdfunding. Options theory argues that when faced with uncertainty, investors have the ‘option’ to delay their irreversible investments, although incur a cost in doing so. Demonstrating that investments in equity crowdfunding are characterised by low levels of irreversibility (i.e., they are semi-reversible), moderate costs of delay and high levels of uncertainty, we follow the predictions of options theory in hypothesising that investors may rationally delay their investments in order to gain new information about the quality of businesses in which they invest. We find empirical evidence in support of these arguments when investigating the dynamics of investment activity in campaigns hosted on the UK equity crowdfunding platform Crowdcube.
AB - In this study, we use the options theory of investment to investigate the funding behaviour of investors in equity crowdfunding. Options theory argues that when faced with uncertainty, investors have the ‘option’ to delay their irreversible investments, although incur a cost in doing so. Demonstrating that investments in equity crowdfunding are characterised by low levels of irreversibility (i.e., they are semi-reversible), moderate costs of delay and high levels of uncertainty, we follow the predictions of options theory in hypothesising that investors may rationally delay their investments in order to gain new information about the quality of businesses in which they invest. We find empirical evidence in support of these arguments when investigating the dynamics of investment activity in campaigns hosted on the UK equity crowdfunding platform Crowdcube.
KW - Cost of delay
KW - Equity crowdfunding
KW - Options theory
KW - Uncertainty
UR - http://www.scopus.com/inward/record.url?scp=85070720465&partnerID=8YFLogxK
U2 - 10.1016/j.jcorpfin.2019.07.011
DO - 10.1016/j.jcorpfin.2019.07.011
M3 - Journal Article
AN - SCOPUS:85070720465
SN - 0929-1199
VL - 58
SP - 784
EP - 803
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
ER -