Equity crowdfunding and financial literacy of individual investors in Japan

Fujii, Masatoshi; Hosomi, Chie; Nose, Yoshiaki

doi:10.1108/jcms-03-2021-0007

Cited by 5 publications

(15 citation statements)

References 54 publications

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“…This type of ECF market is unique in Japan when compared to the Yoshiaki Nose, Chie Hosomi / rest of the world. We have previously indicated that Japanese individual investors may not distinguish between common stock and stock acquisition rights and we emphasized the lack of financial literacy among individual investors (Fujii et al, 2021). However, a comprehensive empirical analysis that accounts for more variables remains an issue, which is addressed in this study.…”

Section: Issues In Prior Researchmentioning

confidence: 92%

“…The Lack of Financial Literacy Hypothesis assumes that individual investors are either unable or unwilling to comprehend the information and signals provided by start-ups and platforms and therefore invest "without understanding" and "somehow." Financial literacy in this context does not refer to a superficial understanding of the information disclosed in ECF, but rather determines whether or not they can perform "due diligence" and "valuation" (Fujii et al, 2021), which professional investors, such as venture capitalists, take for granted.…”

Section: Lack Of Financial Literacy Hypothesismentioning

confidence: 99%

“…Lastly, the fourth variable is IRR. Indeed, as Fujii et al (2021) demonstrate, based on the information disclosed by the platform, Japanese common stock ECF projects can estimate IRR on an investment if the investee goes through an IPO. Such valuation skills are essential in start-up finance and will be used by financially literate individual investors.…”

Section: H2-3: the Likelihood Of A Successful Campaign Increases In P...mentioning

confidence: 99%

“…Private equity investments have historically been made by professional investors, such as venture capitalists and angel investors, because of their high risk. Numerous experts viewed the development of ECF in Japan with skepticism (Fujii et al, 2021). Why has ECF taken off against the expectations of experts?…”

Section: Introductionmentioning

confidence: 99%

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What makes equity crowdfunding successful in Japan? Testing the signaling and lack of financial literacy hypotheses

Nose,

Hosomi

2023

JEMI

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PURPOSE: The first objective of this study is to identify the factors that contribute to the success of equity crowdfunding (ECF) campaigns in Japan. We examined what makes a campaign successful using data from 217 campaigns conducted on FUNDINNO, Japan’s largest ECF platform, between February 2017 and May 2021. The second objective is to assess individual investors’ financial literacy based on the ECF campaign’s success or failure. This study is unique in that it focuses on funding method differences as well as the contents of the business plans disclosed in the ECF campaigns. In Japan, a common equity campaign and stock acquisition rights campaign are run on the same ECF platform, as if they were the same type of funding. Common stock and stock acquisition rights are treated differently by venture capitalists and other professional investors. By comparing the success or failure of the two Japanese projects, we can assess individual investors’ financial literacy after taking into account the project signals. METHODOLOGY: The “Signaling Hypothesis” and the “Lack of Financial Literacy Hypothesis” were tested. Nine and four variables were set as proxy variables for the Signaling Hypothesis and the Lack of Financial Literacy Hypothesis, respectively. This study first divides the qualitative data into success/failure dichotomies for the proxy variables that comprise the hypotheses and then uses a chi-square test to examine the composition ratio of each. The quantitative data among the hypotheses’ proxy variables are then tested for differences in means (t-test) and medians (Wilcoxon signed-rank test). Subsequently, we perform a probit analysis with the explained variable being “success (1)/failure (0)” and the explanatory variable being a proxy variable for the hypothesis. We begin with a probit analysis, and the Logit model is then introduced. Finally, a multiple regression analysis is run with the explained variables “fundraising rate” and “number of investors” and the hypothesized proxy variables as explanatory variables. FINDINGS: We found that the “number of directors” is an effective management ability indicator of ECF success. In terms of start-up fundamentals, investors appear to accept the signals “intellectual property”, “product releases” and “tax incentives.” Awards affected the size of the final funding round. In contrast, B2C companies negatively signaled to private investors. The proxy variable “in final year sales” was supported concerning the lack of a financial literacy hypothesis. Individual investors can be assumed to be financially literate if they perform due diligence. However, since “expected rate of return (Internal Rate of Return, hereafter abbreviated as IRR)” and “common stock dummy” are uncorrelated, we can conclude that they do not demonstrate financial literacy in “valuation,” nor whether or not the investment is profitable. Thus, individual investors’ financial literacy in the Japanese ECF can be considered to be limited. IMPLICATIONS: We have demonstrated which signals investors in Japan’s ECF campaigns respond to. These guidelines will be useful for future start-ups planning ECF campaigns. We were able to identify the lack of financial literacy among ECF individual investors. Therefore, for Japan’s equity capital market to grow in the future, individual investors’ financial literacy must be improved. ORIGINALITY AND VALUE: With very limited analysis in Asia, home to the world’s second- and third-largest stock markets, we have identified the factors behind the success of Japan’s ECF. Identifying success factors in a country like Japan, where many individual investors are extremely risk averse, will provide new insights. By comparing the success or failure of the two types of Japanese ECF projects (common equity projects and stock acquisition rights), we could test the financial literacy of individual investors, taking into account the project signals.

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Section: Issues In Prior Researchmentioning

confidence: 92%

Section: Lack Of Financial Literacy Hypothesismentioning

confidence: 99%

Section: H2-3: the Likelihood Of A Successful Campaign Increases In P...mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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What makes equity crowdfunding successful in Japan? Testing the signaling and lack of financial literacy hypotheses

Nose,

Hosomi

2023

JEMI

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“…Investor harus dapat mengetahui finansial, Fujii et al (2021) mengatakan bahwa investor yang mengerti finansial dapat memperkirakan nilai pasar yang diharapkan dari saham biasa. Mengerti finansial atau mengerti keuangan penting dalam kegiatan investasi, Simpulan Disney et al (2015), mengerti keuangan menurunkan kemungkinan individu mencari bantuan dari konselor kredit sekitar 60%.…”

Section: Pendahuluanunclassified

Pengaruh Literasi Keuangan Dan Inklusi Keuangan Terhadap Perilaku Investasi Guru Ekonomi Sma/Ma Kota Surabaya

Kusumaningtyas

Hakim²,

Harti³

2022

jepk

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Guru ekonomi dengan latar belakang keilmuan yang dimilikinya dinilai mengerti berkaitan literasi keuangan dan inklusi keuangan. Guru ekonomi dengan literasi keuangan dan inklusi keuangan yang dimilikinya akankah berpengaruh terhadap perilaku investasi guru ekonomi. Penelitian ini adalah penelitian korelasional menggunakan metode kuantitatif. Jenis data yaitu primer, sumber data diperoleh melalui hasil tes dan angket guru ekonomi SMA/MA Negeri/Swasta kota Surabaya. Teknik pengambilan sampel purposive sampling. Analisis data menggunakan SEM (Structural Equation Modeling) dengan program Smart PLS. Hasilnya literasi keuangan berpengaruh terhadap perilaku investasi guru ekonomi SMA/MA Negeri/Swasta kota Surabaya; inklusi keuangan berpengaruh terhadap perilaku investasi guru ekonomi SMA/MA Negeri/Swasta kota Surabaya; literasi keuangan dan inklusi keuangan berpengaruh terhadap perilaku investasi guru ekonomi SMA/MA Negeri/Swasta kota Surabaya.

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The use of positive language in equity crowdfunding pitches and fundraising success: The moderating role of punctuation

Gallucci,

Salvi,

Santulli

et al. 2025

Research in International Business and Finance

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Equity crowdfunding and financial literacy of individual investors in Japan

Cited by 5 publications

References 54 publications

What makes equity crowdfunding successful in Japan? Testing the signaling and lack of financial literacy hypotheses

What makes equity crowdfunding successful in Japan? Testing the signaling and lack of financial literacy hypotheses

Pengaruh Literasi Keuangan Dan Inklusi Keuangan Terhadap Perilaku Investasi Guru Ekonomi Sma/Ma Kota Surabaya

The use of positive language in equity crowdfunding pitches and fundraising success: The moderating role of punctuation

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