Can an early exit mechanism attract more pledges in equity-based crowdfunding? Evidence from China

Abstract

This paper aims to explore the impact of the early exit mechanism on equity-based crowdfunding performance. We conducted the empirical test using the method of propensity score matching on the data from a Chinese crowdfunding platform. The results demonstrate that the adoption of early exit options hurts the funding performance. This negative impact is mainly derived from the value-added investors’ dislike for such an exit mechanism. In contrast, small investors have no apparent preference for projects with or without early exit options.