New Publication in the journal „Entrepreneurship Theory and Practice“

Article from Asst. Prof. Daniel Blaseg, Prof. Douglas Cumming and Prof. Michael Koetter in the journal „Entrepreneurship Theory and Practice“

The journal  „Entrepreneurship Theory and Practice“ has published the article "Equity Crowdfunding: High-Quality or Low-Quality Entrepreneurs?" by Daniel Blaseg, Douglas Cumming and Michael Koetter.



Equity crowdfunding (ECF) has potential benefits that might be attractive to high-quality entrepreneurs, including fast access to a large pool of investors and obtaining feedback from the market. However, there are potential costs associated with ECF due to early public disclosure of entrepreneurial activities, communication costs with large pools of investors, and equity dilution that could discourage future equity investors; these costs suggest that ECF attracts low-quality entrepreneurs. In this paper, we hypothesize that entrepreneurs tied to more risky banks are more likely to be low-quality entrepreneurs and thus are more likely to use ECF. A large sample of ECF campaigns in Germany shows strong evidence that connections to distressed banks push entrepreneurs to use ECF. We find some evidence, albeit less robust, that entrepreneurs who can access other forms of equity are less likely to use ECF. Finally, the data indicate that entrepreneurs who access ECF are more likely to fail.

We would like to congratulate the authors on this successful publication.