In digital finance markets, investors can withdraw their non-binding bids within a cooling-off period. As the bids are visible online, we argue that this option can be used to manipulate the information available to investors. Previous research indeed shows that early bids attract later investors and trigger information cascades, thereby enhancing the chances of success of the offerings. Using a dataset of 3564 investment lines, we observe frequent (10.2%) investment withdrawals before the end of the offerings. Platform members invested in 64% and later withdrew from 30% of the offerings listed in their portal, being 1.85 times more likely to withdraw than the average crowdfunding investor. We document that their investments take place predominantly in low-quality offerings and influence the campaign dynamics, increasing the number of subsequent bids.

(2021). Information manipulation in equity crowdfunding markets [journal article - articolo]. In JOURNAL OF CORPORATE FINANCE. Retrieved from http://hdl.handle.net/10446/172534

Information manipulation in equity crowdfunding markets

Meoli, Michele;Vismara, Silvio
2021-01-01

Abstract

In digital finance markets, investors can withdraw their non-binding bids within a cooling-off period. As the bids are visible online, we argue that this option can be used to manipulate the information available to investors. Previous research indeed shows that early bids attract later investors and trigger information cascades, thereby enhancing the chances of success of the offerings. Using a dataset of 3564 investment lines, we observe frequent (10.2%) investment withdrawals before the end of the offerings. Platform members invested in 64% and later withdrew from 30% of the offerings listed in their portal, being 1.85 times more likely to withdraw than the average crowdfunding investor. We document that their investments take place predominantly in low-quality offerings and influence the campaign dynamics, increasing the number of subsequent bids.
articolo
2021
Meoli, Michele; Vismara, Silvio
(2021). Information manipulation in equity crowdfunding markets [journal article - articolo]. In JOURNAL OF CORPORATE FINANCE. Retrieved from http://hdl.handle.net/10446/172534
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10446/172534
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