Crowdfunding and Bank Stress

Blaseg, Daniel; Koetter, Michael

doi:10.1007/978-3-319-42448-4_3

Cited by 10 publications

(8 citation statements)

References 44 publications

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“…More recently, crowdfunding markets have developed to provide entrepreneurs with alternative sources of financing (e.g., Bruton et al, 2015;Fraser et al, 2015), particularly after the financial crisis, which put increased stress on banks (Blaseg and Koetter, 2016).…”

Section: Challenges Related To Traditional External Finance and Crowdfunding As A Potential Solutionmentioning

confidence: 99%

Equity crowdfunding: First resort or last resort?

Walthoff-Borm

Schwienbacher

Vanacker

2018

Journal of Business Venturing

188

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Prior research has focused on the factors that affect funding success on equity crowdfunding platforms, but a detailed understanding of the factors that drive firms to search for equity crowdfunding in the first place is lacking. Drawing on the pecking order theory, we argue that firms list on equity crowdfunding platforms as a -last resort‖-that is, when they lack internal funds and additional debt capacity. In line with the pecking order theory, the empirical evidence shows that firms listed on equity crowdfunding platforms are less profitable, more often have excessive debt levels, and have more intangible assets than matched firms not listed on these platforms. We discuss the implications for theory and practice.

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Section: Challenges Related To Traditional External Finance and Crowdfunding As A Potential Solutionmentioning

confidence: 99%

Equity crowdfunding: First resort or last resort?

Walthoff-Borm

Schwienbacher

Vanacker

2018

Journal of Business Venturing

188

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“…For example, anecdotal evidence suggests that equity crowdfunding appeals to entrepreneurs who feel unlikely to be able to access conventional forms of bank lending in order to grow (Collins and Pierrakis, 2012). Indeed, bad credit scores have been found to increase the probability of ventures seeking crowdfunding (Blaseg and Koetter, 2015). As conclusive empirical evidence on this relationship does not yet exist, however, our first subresearch question, linked to RQ1, is, ‘To what extent are equity crowdfunded firms discouraged borrowers?’…”

Section: Literature Reviewmentioning

confidence: 99%

Working the crowd: Improvisational entrepreneurship and equity crowdfunding in nascent entrepreneurial ventures

Brown

Mawson

Rowe

et al. 2017

International Small Business Journal: Researching Entrepreneurs

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Equity crowdfunding has rapidly established itself as an important part of the funding landscape for nascent entrepreneurial ventures. To date, however, little is known about the nature of the demand for equity crowdfunding or its impact on recipient firms. This paper draws on an interview-based study of entrepreneurs in 42 equity crowdfunded start-ups in the UK. The study found strong demand for this funding from these experimental and improvisational entrepreneurs within innovative, consumer-focused, early stage firms. Many entrepreneurs were classic "discouraged borrowers" attracted by the ability to obtain finance quickly with relatively little diminution of their equity or autonomy. In terms of impact, equity crowdfunding seems to confer important intangible benefits to investee companies which amount to more than money. Given their strongly improvisational nature, the concept of entrepreneurial bricolage seems a suitable theoretical lens explicating the behavioural aspects of the entrepreneurs examined.

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“…11 Finally, some authors have asked the question if crowdfunding and bank financing are substitutes or complements (see, e.g., De Buysere et al, 2012;Xu, 2018;Cole et al, 2019)? Cases where entrepreneurs use crowdfunding because they do not have access to bank loans (or where the cost of debt financing is too high) and the examples discussed in Blaseg and Koetter (2016) and Xu (2018) support the former. On the other hand cases where firms use mixed financing support the latter (see also Cole et al, 2019).…”

Section: Introductionmentioning

confidence: 99%

“…Our research question is motivated by the following. Firstly, as follows from previous paragraph, both bank loans and crowdfunding are important sources of financing for modern entrepreneurs and many businesses deal with this choice (see, e.g., Blaseg & Koetter, 2016;Xu, 2018;Xu et al, 2020;Cole et al, 2019;Bernardino & Santos, 2020). Although in some cases either a pecking order exists in a sense that entrepreneurs select crowdfunding because they were refused by a bank or a reverse pecking order where entrepreneurs select bank financing because of lack of knowledge about crowdfunding (Bernardino & Santos, 2020), in many cases this choice is not so obvious.…”

Section: Introductionmentioning

confidence: 99%

“…bank loans while firms with high uncertainty may be interested in alternative finance. In the spirit of this literature Blaseg and Koetter (2016) find a substitution effect between equity-based crowdfunding and bank loans, i.e., firms working with distressed banks will more likely seek crowdfunding. Third line of literature argues that high-quality firms can use crowdfunding to signal their quality and further seek for traditional finance provided by banks or other large investors (Roma et al, 2017;Chen et al, 2018;Babich et al, 2019).…”

Section: Introductionmentioning

confidence: 99%

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Crowdfunding and bank financing: substitutes or complements?

Miglo

2022

Small Bus Econ

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In this paper, we analyze a firm choice between crowdfunding and bank financing. For many entrepreneurs, it is an important issue. We analyze a model where the choice of financing is affected by moral hazard problem regarding the choice of production scale that favors bank financing, and by the uncertainty about market demand that favors crowdfunding. We argue that long crowdfunding campaigns or campaigns with large targets usually are less efficient in mitigating moral hazard problem than small/short campaigns. We also argue that high-quality firms and firms with potentially large markets will tend to select bank financing while projects with largest amount of investment should select mixed financing where the firm uses a short crowdfunding campaign and a bank loan. Most of our model empirical predictions have not been directly tested so far while they are indirectly consistent with available evidence.

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Crowdfunding and Bank Stress

Cited by 10 publications

References 44 publications

Equity crowdfunding: First resort or last resort?

Equity crowdfunding: First resort or last resort?

Working the crowd: Improvisational entrepreneurship and equity crowdfunding in nascent entrepreneurial ventures

Crowdfunding and bank financing: substitutes or complements?

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