Finance studies on information cascades typically differentiate between institutional and retail investors, as this is the only information available to potential investors.
Information displayed online in equity crowdfunding platforms includes instead also details on investments (bids) of individual investors.
We show that early bids attract later investors and trigger information cascades, thereby enhancing the chances of success of the offerings.
Investors can withdraw their non-binding bids within a cooling-off period.
We document that this withdraw option is frequently used by platform managers to manipulate the information available to investors.
Platform managers manipulate bids to support weaker firms to increase the platform’s fundraising success rate and revenue generation.
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