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The role of funding portals as signaling offering quality in investment crowdfunding

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  • de Andrés, Pablo
  • Correia, Ricardo
  • Rezola, Álvaro
  • Suárez, Nuria

Abstract

We examine the effect of the issuer fee paid to portals on the success of investment crowdfunding using 1,694 offerings launched in the US during May 2016 – September 2019. We show that a mixed issuer fee (i.e. fixed gross fee and a share of securities) influences the probability of success, suggesting a positive signaling-effect that mitigates adverse selection problems between retail investors and issuers. Specifically, the use of a mixed issuer fee increases the probability of success by 33.5%. This effect remains after controlling for other information-risk-reducing mechanisms and it is contingent on firm-level characteristics.

Suggested Citation

  • de Andrés, Pablo & Correia, Ricardo & Rezola, Álvaro & Suárez, Nuria, 2022. "The role of funding portals as signaling offering quality in investment crowdfunding," Finance Research Letters, Elsevier, vol. 46(PA).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321003470
    DOI: 10.1016/j.frl.2021.102355
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