Signal startup quality in syndicate equity crowdfunding: The effect of lead investors’ network centrality and reputation

This study contributes to the debate on the post-campaign effects of equity crowdfunding by investigating how prior engagement in equity crowdfunding influences the value added by subsequent venture capital investment, and how this relationship is shaped by the governance structure adopted during the crowdfunding campaign. Analysing 2514 ventures that secured venture capital funding in the United Kingdom, Germany, France, or Italy between 2015 and 2021, we find that ventures previously funded through equity crowdfunding exhibit lower post-investment growth than those backed solely by venture capital. However, this negative effect is significantly attenuated when the crowdfunding campaign was conducted through a nominee shareholder structure. This study emphasizes the importance of designing financing sequences according to specific business needs, as well as the importance of managing the investor base, mitigating coordination and governance costs. • Prior ECF reduces asset growth following VC funding. • Governance structures in ECF shape how effectively VCs add value. • With nominee shareholder structure, VC impact is preserved after ECF. • Results hold across multiple identification strategies.

Drawing on a theoretical framework associated with the cognitive perspective, we propose that investors will rely on heuristic cognitive processes when signals from entrepreneurs are congruent or imbalanced incongruent. However, when signals are balanced incongruent, investors will engage in systematic cognitive processes that incorporate additional information from the herding behavior of other investors. We find evidence supporting our hypotheses in a sample of campaigns listed on a UK equity crowdfunding platform. Further analysis employing advanced machine learning techniques reveals that investors engage more in systematic processes when signals from entrepreneurs are in a weak form of balanced incongruence rather than a strong form.

Herding behaviour in equity crowdfunding and P2P lending markets: A systematic meta-analysis

Purpose: The objective of this paper is to examine factors that influence funders' intention to contribute to equity crowdfunding platforms through the role of perceived trust in Malaysia. Based on the Theory of Planned Behavior (TPB), this study incorporates motivational factors of intrinsic and extrinsic rewards to provide insight on what motivates Malaysian equity funders to contribute to crowdfunding platforms. Design/methodology/approach: Ex post facto research was adopted to address the objective of this study. Data was collected using a stratified random sampling technique and a 5-point Likert scale survey questionnaire were distributed online. From the disseminated questionnaire, data were obtained from seventy-six (76) potential investors actively participating in crowdfunding located around Selangor state, Malaysia. The empirical data gathered was analyzed using SmartPLS software utilizing the Partial Least Squares Structural Equation Modeling (PLS-SEM), to examine the relationships among the TPB constructs, and intention to contribute to equity crowdfunding platform. Findings: Extrinsic rewards were found to exert a strong influence on perceived trust, which subsequently creates a positive effect on funders’ intention to invest in a crowdfunding platform. Traditional TPB components, attitude, subjective norm, and perceived behavioral control, along with intrinsic rewards, failed to produce statistically significant results to funders’ intention however perceived trust emerged as a key mediator, confirming its vital role as a stimulator to increase funders’ intention in contributing to the equity crowdfunding platform. Practical implications: The findings highlight the need for building perceived trust to enhance funders’ interest in making contributions to equity crowdfunding platforms due to the perceived risk of high failure, as it involves startups or early-stage ventures. Besides, limited access to detailed financial information of startups makes trust a crucial psychological determinant for motivating contributions. Thus, emphasizing the tangible benefits may further improve funders’ retention and encourage participation in equity crowdfunding platforms. Originality/value – This study adds to the expanding literature on crowdfunding and equity crowdfunding by integrating the empirical factors essential for validating and encouraging investors’ participation in crowdfunding platforms into an innovative, inclusive, and flexible financial model. Additionally, since crowdfunding also serves as support platforms for social, cultural, and environmental causes, donors can directly support issues they care about, and innovators can develop high-impact solutions that mainstream funders might deem too risky.

This study examines the regulatory framework, contractual structures, and legal challenges of conventional and sharia equity crowdfunding as alternative financing mechanisms for Micro, Small, and Medium Enterprises in Indonesia, with comparative insights from Malaysia. The research employs a normative legal methodology analyzing primary legal instruments including Indonesian Finance Authority Regulation, and related regulations, supplemented by empirical literature examining crowdfunding implementation in both jurisdictions. The findings reveal that Indonesia operates a dual regulatory framework combining securities regulations with Islamic jurisprudential guidance, while Malaysia pioneered ECS licensing in 2015 with ongoing debates regarding Sharia governance depth. Conventional equity crowdfunding employs standard share subscription agreements under corporate law, whereas sharia equity crowdfunding utilizes Islamic contracts including musharakah, mudharabah, qardh hasan, and ijarah to ensure compliance with prohibitions against riba, gharar, and maysir. The study identifies three significant legal issues: regulatory gaps particularly concerning sharia share offering provisions and Sharia Supervisory Board responsibilities, cybercrime vulnerabilities affecting unregistered platforms comprising approximately ninety percent of sharia operators, and money laundering risks through electronic payment mechanisms. The research further demonstrates that religious investors significantly influence crowdfunding success, with Islamic campaigns attracting 37.1 percent higher funding based on empirical evidence from comparable markets. The study concludes that effective sharia crowdfunding development requires statutory-level legislation, enhanced Indonesian Finance Authority Regulation supervision of unregistered platforms, mandatory cybersecurity standards, comprehensive Sharia governance frameworks with separate review, audit and risk functions, and targeted financial literacy programs. These recommendations aim to bridge the gap between sharia principles and positive law while expanding MSME access to equity-based financing aligned with maqasid al-Shariah objectives.

Micro, small, and medium enterprises (MSMEs) in North Sumatera facepersistent financing constraints that limit their contribution to regional economiccompetitiveness. Despite the proliferation of peer-to-peer (P2P) lending andsecurities crowdfunding platforms, pure debt and pure equity models exhibitstructural limitations: P2P lending suffers from high default risk and informationasymmetry, while equity crowdfunding imposes excessive dilution costs andvaluation challenges for early-stage MSMEs. This conceptual paper proposes ahybrid debt-equity funding model that integrates complementary financinginstruments through digital platforms, addressing these limitations by optimizingrisk allocation, reducing information frictions, and matching investor preferencesto firm lifecycle stages. Grounded in Capital Structure Theory, FinancialIntermediation Theory, Information Asymmetry frameworks, and AgencyTheory, the model demonstrates theoretical superiority over single-instrumentapproaches. North Sumatera serves as a critical testing ground due to itssubstantial MSME sector (contributing 57.8% to regional GDP), documentedcapital access barriers (only 15.2% of MSMEs receive bank loans), andsupportive regulatory environment under Indonesia's OJK fintech framework.Through conceptual development and policy analysis, this study presents atheoretically robust framework, comparative performance analysis, andimplementation roadmap. The hybrid model offers a scalable solution to bridgethe MSME financing gap in emerging markets, with implications for financialinclusion policy and platform governance

Abstract Equity crowdfunding (ECF) platforms rely heavily on visual information while operating under pronounced information asymmetries, raising the question of whether founder facial attractiveness functions as a consequential signal in retail investors’ decision making. Drawing on signaling theory and dual-process/thin-slice accounts, we investigate whether and why founder facial attractiveness influences perceived venture success, investment amounts, and expectations of reciprocity. Using an eight-round, incentive-compatible ECF-like task, 229 lay investors evaluated AI-generated founder portraits that were rigorously pretested to manipulate facial attractiveness while holding perceived leadership suitability constant, thereby isolating the effect of attractiveness. Investor decisions were analyzed using generalized estimating equations to account for repeated measures and to control for individual risk propensity and demographic characteristics. Across outcomes, founders depicted as more attractive elicited higher expectations of venture success, larger investment amounts, and stronger expectations of reciprocity. These effects were robust and did not vary as a function of founder or investor sex. The findings advance signaling theory in entrepreneurial finance by demonstrating that non-diagnostic visual cues can systematically shape investor judgments when information is sparse and cognitive elaboration is constrained. In the image-forward, retail-investor context of ECF, facial attractiveness operates as a powerful platform-visible signal despite lacking intrinsic diagnostic value. Practically, the results suggest that platforms should surface diagnostic information earlier and consider debiasing prompts, while founders should complement professional imagery with verifiable signals of quality. More broadly, the study highlights the importance of ethics-by-design approaches to visual presentation in entrepreneurial finance environments involving retail investors.

This study examines the optimal legal entity framework for the sustainable development of commercial crowdfunding in Indonesia, with a focus on Equity Crowdfunding and Securities Crowdfunding. Employing a normative and conceptual legal methodology, it analyzes key regulations issued by the Financial Services Authority and assesses their coherence with the constitutional principle of economic democracy. The study contends that legal entity selection plays a critical role in ensuring legal certainty, accountability, and investor protection within crowdfunding ecosystems. It evaluates the suitability of various legal forms, including limited liability companies, cooperatives, foundations, and partnership structures, in facilitating profit-oriented fundraising while preserving market integrity. The analysis underscores the necessity of a clear regulatory distinction between social and commercial crowdfunding models. The findings demonstrate that optimizing legal entity structures is a strategic imperative to enhance fintech governance, expand MSME and startup access to capital, and advance inclusive growth in Indonesia’s digital economy

The rise of crowdfunding has transformed the funding landscape for startups, offering an alternative to conventional financing avenues. This study focuses on equity crowdfunding and investigates the dynamics of herding behavior among investors and its influence on campaign success. We analyze 680 equity crowdfunding campaigns from Wadiz, the largest platform in South Korea (2016–2021). In contrast to traditional funding, equity crowdfunding creates a two-sided market through its platform-based service, fostering interactions between entrepreneurs seeking funds and investors seeking opportunities. The time-limited nature of campaigns further encourages sequential decision-making and potential herding behavior. Unlike prior studies that have predominantly emphasized entrepreneurial and campaign-related factors, this study highlights the pivotal role of investor behavior, recognizing fellow investors as valuable signaling entities within the platform. Using OLS regression, logistic regression, interaction analysis, and Propensity Score Matching (PSM), we find that early participation by professional investors increases the odds of campaign success by approximately 14%. Furthermore, the effect is more pronounced in the IT industry, where information asymmetry is especially severe. Our findings demonstrate the signaling role of professional investors in mitigating information asymmetry and improving campaign outcomes, providing actionable insights for entrepreneurs, investors, and platforms in the evolving landscape of equity crowdfunding.

Religious Investors and Equity Crowdfunding Success

Fintech Regulation in Sub-Saharan Africa

Pathways to success in equity crowdfunding for sustainable startups: A configurational perspective

Research background: The majority of research on equity crowdfunding concerns its evolution in developed countries. There are still relatively few works devoted to equity crowdfunding in developing regions, including Poland. Taking this into account and the lack of research on the effectiveness of ECF-based IPOs, there is a research gap that this article is trying to fill. This paper also contributes to the extensive literature dealing with the occurrence of the IPO underpricing phenomenon and focuses on a regional study on IPO underpricing in the still niche ECF-based IPOs. Purpose of the article: The article aims to show the development of equity crowdfunding in Poland. The article also aims to (i) evaluate the effectiveness of debuts of companies that raised funds (and thus carried out their IPOs) using ECF platforms, and (ii) find the determinants of ECF-based IPOs performance. Methods: The model for testing the potential determinants of ECF-based IPO performance is based on univariate linear regressions measuring the relationship between a dependent variable which stands for ECF-based IPO underpricing and one independent variable (chosen from a set of potential explanatory variables. Findings & value added: The article shows that since 2020 ECF has become an important source of financing for listed SMEs in Poland. Based on the stylized fact on the risk-return tradeoff, it is assumed that ECF-based IPOs are more underpriced than IPOs of other companies to attract investors. The paper revealed that the effectiveness of ECF-based IPOs has mainly the cyclical nature and it depends on the stock price cycle. ECF-based IPOs are more underpriced then other IPOs only in the bull market while in the bear market they are more overpriced. To the best of my knowledge, this is the first study to explore the performance of ECF-based IPOs. Although this paper focuses on Poland, it opens the potential for broader global research in this area. The article can also hold significant practical value for all participants of the ECF market.

The rapid expansion of equity crowdfunding in Türkiye has revealed a significant demand from investors for Shariah-compliant opportunities. However, the absence of a formal Shariah governance framework has created critical vulnerabilities, including erosion of trust, information asymmetry, a clear legal void and ambiguity of liability, inadequate due diligence, reputational and sustainability risks, unnecessary operational burden, voluntary financial exclusion, and systemic risk, which undermine the integrity of this emerging market. This study addresses this governance deficit through a qualitative analysis grounded in a critical literature review. Its primary contribution is twofold: first, it systematically maps the specific Shariah governance challenges inherent in Türkiye's crowdfunding ecosystem; second, it proposes three distinct, practical governance models to resolve them. These models are: (1) the Two-Tier Shariah Governance Model, which establishes a central authority and specialized platforms; (2) the Hybrid Model, which integrates an "Islamic window" into existing platforms; and (3) the Outsourced Shariah Governance Model, which standardizes third-party compliance verification. The implementation of any of these frameworks would institutionalize trust, mitigate risk, and foster the sustainable development of equity crowdfunding in Türkiye, serving as a template for other jurisdictions facing similar challenges.

Equity crowdfunding provides entrepreneurs and founders an opportunity to raise funds from large number of audience in which each investor provide small amount, instead of large amount from small group of professional investors. Early research focused on success drives of equity crowdfunding but this study explores the quality signals that affect the investors’ investment decision and help entrepreneurs to achieve overfunded campaign success in equity crowdfunding. Based on signaling theory, we develop a research model to conduct an empirical study using quantitative data collected from UK based world largest equity crowdfunding platform, Crowdcube. Findings show that quality signals have positive significant effect on investors’ investment decision. It means that investors’ behavior is same while making investment decision in equity crowdfunding as in conventional investment settings. Investors read quality signals in equity crowdfunding as well and choose those crowdfunding campaigns that are with high magnitude of quality signals. These results confirm that investors always evaluate investment opportunities in terms of business potential by analyzing quality signals in conventional investment opportunities as well as in equity crowdfunding.

This paper examines the current state and challenges of innovation and entrepreneurship among small and medium-sized enterprises (SMEs) in Liaoning Province, exploring pathways for high-quality development through fintech-enabled mechanisms. Research indicates that while Liaoning's SMEs have improved innovation metrics, their national rankings have generally declined, revealing three structural challenges: a disconnect between innovation and capital, diminished investment appeal, and market entities exhibiting “false prosperity”. To address these issues, the study proposes leveraging fintech solutions such as establishing enterprise digital profiling platforms, promoting blockchain technology applications, and developing equity crowdfunding and big data-driven credit services. These measures aim to alleviate financing constraints, enhance information transparency, and facilitate resource integration, thereby providing actionable strategies for fostering innovation among SMEs and revitalizing the regional economy.

This study investigates how project radicalness, team creativity, and intellectual property influence the success of equity crowdfunding (ECF) campaigns. Using fuzzy-set Qualitative Comparative Analysis (fsQCA) on a sample of 42 campaigns from Italian ECF platforms, we explore the configurations of innovation-related dimensions that lead to successful fundraising outcomes. Our findings reveal that no single factor guarantees success. Rather, specific combinations of innovation dimensions are crucial. These results support a contingent perspective and offer practical insights for campaign designers and platform managers seeking to optimise innovation signalling in ECF.

Benchmarking equity crowdfunding attractiveness: Evidence from the G20

Entrepreneurs’ optimal decisions in equity crowdfunding campaigns