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Financial statement audit and regulatory focus in equity crowdfunding decisions

Author

Listed:
  • Regan Stevenson

    (Indiana University)

  • Jared Eutsler

    (University of North Texas)

  • Bradley Lang

    (Mississippi State University)

  • Jesse C. Robertson

    (University of North Texas)

Abstract

Equity crowdfunding (ECF) allows amateur investors to fund startups and small and medium-size enterprises (SMEs). Unlike initial public offerings, ECF requires minimal disclosures, fast-tracking equity raising. ECF's popularity has surged, yet little is known about how assurance services might impact investor decisions. Drawing on regulatory focus theory, we examine how independent assurance, pitch characteristics, and investor regulatory focus influence investment decisions in ECF. Our results support our hypotheses that audits of historical financial information increase ECF investors’ likelihood to invest. Further, interactions between the audit, investors’ regulatory focus, and the regulatory focus of the ECF pitch increase investment such that the presence of an audit increases investment for prevention-focused individuals, and especially the audit is most likely to increase investment for prevention-focused investors when the SME’s pitch is also prevention-focused. Overall, we contribute to literature by exploring the influence of assurance in a new context of ECF, shedding light on previously unexplored aspects of investor decision-making.

Suggested Citation

  • Regan Stevenson & Jared Eutsler & Bradley Lang & Jesse C. Robertson, 2025. "Financial statement audit and regulatory focus in equity crowdfunding decisions," Small Business Economics, Springer, vol. 64(3), pages 1233-1258, March.
    • Handle: RePEc:kap:sbusec:v:64:y:2025:i:3:d:10.1007_s11187-024-00941-z
    DOI: 10.1007/s11187-024-00941-z
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    References listed on IDEAS

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    More about this item

    Keywords

    Assurance; Audit; Equity Crowdfunding; Investors; New Ventures;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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