Equity Crowdfunding: Factors Influencing the Performance of Firm in Malaysia

Abstract

This study aims to investigate the factors that influence the performance of the firms funded by equity crowdfunding after the campaign ended successfully. The factors investigated are the top management team (TMT), social networks and the platform provider (PP). Not many studies discuss on the related variables on ECF ecosystem in Malaysia. As such, this study adopts conceptual research approach by examining and analysing previous literatures on the topic. This study will answer the following questions; i) How TMT, social networks and platform provider influence the performance of the ECF funded firm. The findings indicate that under crowdfunding ecosystem, the characteristics of the founder and TMT play an important roles to attract the investors' attention. They form a strategic human assets in the firm. This implicitly signals the firm's values and reduce the asymmetry information. The values upsurge with the social traits among their networks. The networks can be among other those with more funding capability to inject more money when requested by the entrepreneur. Investors in crowfunding scenario invest based on closeness and trustworthiness. Thus, ECF funded firm with promising human capital, networks capital generated internally and externally as well as well known platform provider plus the workable business plan able to attract financial capital from investors when needed. The emergence of ECF fund and other new emergence financing instruments have evolved the entrepreneurial landscape worldwide. Moreover, these funding are unique as they can be tailored according to the firm funding objective. Nowadays, these type of funding have been widely used in real estate, agricultural and health industries too. The revolution in financial industry known as fintech is a plus to crowdfunding ecosystem. Despite of disrupting the traditional banking and financial institutions, crowdfunding provides opportunities to potential ventures with scarce capital resources. The uniqueness of this research is that previous studies yet to discuss how PP moderates the effect of founder, TMT and networks towards the ECF funded firm performance.

Pandemic Chaos: Equity-based Crowdfunding in Malaysia

“…The nature of MSMEs as highly risky, absent collateral to pledge, and lack of financial reports cause their chances to penetrate a traditional banking system as very low and probably altogether impossible contributes to the rising number of MSMEs and start-ups being financially underserved and ceases operation (Arcuri & Levratto, 2018). Kassim et al (2020) highlight that ECF platforms in Malaysia do not have a standard way to present the campaign's information on their platforms. Some of them do not display due to the issuers or investors issues.…”