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Invest or regret? An empirical investigation into funding dynamics during the final days of equity crowdfunding campaigns

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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.
Original languageEnglish
Pages (from-to)784-803
JournalJournal of Corporate Finance
Volume58
Early online date24 Jul 2019
DOIs
Publication statusPublished - 1 Oct 2019

Documents

  • COXj_2019_cright_JCF_Invest or regret - An empirical investigation into funding dynamics during the final days of equity crowdfunding campaigns

    Accepted author manuscript (Post-print), 601 KB, PDF document

    Due to publisher’s copyright restrictions, this document is not freely available to download from this website until: 24/01/21

    Licence: CC BY-NC-ND

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