Equity Crowdfunding: Investigating Assurance Products and Individual Factors in an Emerging Funding Context.

• In Event: Breakfast and Research & Education Table Forum
  In Roundtable Session: Table 12: Assurance and equity crowdfunding

Abstract

Equity crowdfunding venture (ECF) is a novel funding mechanism used by early-stage entrepreneurs to raise up to $1 million from the general public, without the registrations and disclosures typically associated with an initial public offering. ECF targets smaller investments from largely unsophisticated investors for ventures that are unproven with limited operational history. We investigate how independent assurance, characteristics of the fundraising pitch, and amateur investor traits impact decisions to invest in an ECF. Specifically, in a 2x2x2 experiment, we manipulate the presence of an audit, forward looking assurance, and the regulatory focus of the pitch. Our results support our hypotheses that audits of historical financial information and assurance of forward looking information increase ECF investors’ likelihood to invest. Further, the fit interaction between the regulatory focus (promotion, prevention) of the ECF pitch and investors’ traits increases investment. Our study identifies a new context in which an audit can provide value to investors, and we propose a new, value-added service that CPA firms can perform for ECF clients: forward-looking assurance on projected, pro forma financial statements. Overall, this study contributes to accounting literature as it is the first to investigate the influence of financial disclosures in the context of equity crowdfunding.

Authors

• Regan Stevenson, Indiana University

• Jesse C Robertson, University of North Texas

• Bradley Allan Lang, Mississippi State University

• Jared A Eutsler, University of North Texas