Crowdinvesting: success factors and investors preferences

Деятельность: выступлениевыступление с устной презентацией

Описание

Crowdinvesting (equity crowdfunding) is a method of raising capital from a large group of investors who invest certain amounts of money in exchange for company’s shares through Internet intermediaries, crowdfunding platforms. The main difference between crowdinvesting and other types of crowdfunding is that investors become company’s shareholders. The latest trend is growth in the number of crowdfunding platforms, crowdinvesting volume, number of investors on crowdfunding platforms, number of companies raising investment on crowdfunding platforms.
Crowdinvesting in Russia is not well studied, while it is developing rapidly and has similar trends with foreign markets. Accumulated international experience may be relevant for Russian companies raising equity investments on crowdfunding platforms and for equity investors. On crowdfunding platforms in Russia investors often put their money in companies that fail to achieve the preliminary target (in that case money is returned to investors, investors and companies lose time and funds). In 2018 on one of the largest crowdfunding platforms in Russia Planeta.ru only 29.78% of the companies have successfully achieved the targets and raised funds.
This research is one of the first to study the relationship between the characteristics of companies raising funds on crowdfunding platforms and their attractiveness to investors, as well as financial performance of the issuers. Research questions raised are the following: what characteristics of companies raising funds on crowdfunding platforms do attract investors? What characteristics of companies raising equity investments on crowdfunding platforms may signal potential investors about the future high firm performance?
Empirical study is conducted with the tools of statistical and econometric analysis. The study sample includes 293 companies that raised equity investments on the UK crowdfunding platform Crowdcube between 2011 and 2019. The UK is one of the leaders on the crowdinvesting market in terms of governmental regulation and funding volume. Crowdcube is the largest crowdfunding platform in the UK. Large number of studies on crowdinvesting was conducted based on the data collected from Crowdcube.
Characteristics of companies investigated in this research are company’s age, presence of the registered patents as indicators of innovative activity and intellectual capital, corporate governance factors – dual-class shares issued by companies, managerial ownership, size of the board of directors, presence of non-executive directors on the board.
The results obtained demonstrate that companies offering non-voting shares, which do not provide voting rights, but give an opportunity to receive dividends, are more attractive to potential investors. This finding could be explained by the fact that voting shares placement could lead to increase in agency costs and make an agency conflict more acute. Moreover, investors on crowdfunding platforms acquire small number and portion of shares, that do not provide a real voting right at shareholders’ meetings and do not allow participating in company’s governance.
Direct relationship was established between the size of the board of directors of a company raising equity investments on crowdfunding platform and its financial performance. Although the results of the studies on the relationship between the board size and corporate performance are controversial, there is an evidence that larger boards can better monitor management because of bigger amount of “observers” on the board, accumulate more information regarding the factors that can affect company’s value (product markets, technologies, regulations, M&A, etc.). Bigger size boards can be more effective in terms of advising. Financial performance of companies in which managers participate in company’s equity is better than in companies in which managers do not possess company’s shares. In firms, in which managers possess ownership and therefore are more interested in increase of stock prices and enhancing company value, agency costs are supposedly lower, managers are expected to operate more efficiently, and companies are anticipated to perform better.
Companies on crowdfunding platforms with registered patents perform better in future than companies without registered patents. Obtained result is explained by the fact that patents are indicators of innovative activity, research and development and stronger intellectual capital of a company. Older companies are more attractive to investors on crowdfunding platforms, but younger companies experience higher stock performance in future. Moreover investors prefer investing in non-diversified companies.
Based on the research findings investors on crowdfunding platforms should choose companies to invest taking into consideration the characteristics of companies that are drivers of their financial performance, such as the presence of registered patents, the size of the board of directors, management participation in company’s capital, rather than subjective judgement of a business idea and their own experience. According to the obtained results based on data collected from the UK crowdfunding platform investors should choose non-diversified companies offering non-voting shares, since these companies are more likely to achieve the target and raise investments.

Период15 апр 2021
Название событияXXII April International Academic Conference on Economic and Social Development
Тип мероприятияконференция
Номер конференцииXXII
МестонахождениеМосква, Российская Федерация
Степень признанияМеждународная

Ключевые слова

  • Crowdinvesting
  • Equity crowdfunding