Crowdfunding and bank financing: substitutes or complements?

Miglo, A. (2022) Crowdfunding and bank financing: substitutes or complements? Small Business Economics, 59(3), pp. 1115-1142. (doi: 10.1007/s11187-021-00571-9)

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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.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Miglo, Dr Anton
Authors: Miglo, A.
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:Small Business Economics
ISSN (Online):1573-0913
Published Online:15 January 2022
Copyright Holders:Copyright © 2022 The Author
First Published:First published in Small Business Economics 59(3): 1115-1142
Publisher Policy:Reproduced under a Creative Commons License

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