Financial literacy and security‐based crowdfunding. (31st January 2021)

• Record Type: Journal Article
• Authors: Meoli, Michele; Rossi, Alice; Vismara, Silvio
• Is Part Of: Corporate governance. Volume 30:Number 1(2022)
• Page Start: 27
• Page End: 54
• Publication Date: 2021-01-31
• Subjects: corporate governance -- crowdfunding -- financial literacy -- platforms -- survival profile; Corporate governance -- Periodicals; 658.1145
• DOI: 10.1111/corg.12355
• Languages: English
• ISSNs: 0964-8410

Abstract

Abstract: Research Question/Issue: This study investigates the relationship between financial literacy and the survival profile of the security‐based crowdfunding platforms. Security‐based crowdfunding has recently emerged as a novel market that allows small investors to engage directly in financing entrepreneurial ventures. However, a certain level of financial literacy is required to understand and manage these digital finance tools. A better understanding of the impact of financial literacy is, therefore, central to the development of these markets and the achievement of their inclusive potential. Research Findings/Insights: Using data of the universe of 432 security‐based crowdfunding platforms in 37 OECD countries from 2007 to 2019, we find higher platforms' survival profiles where the level of financial literacy is high. Financial literacy, however, needs to combine with specific platform characteristics to take full effect, as it matters more to those platforms that deliver voting rights and that provide poorer value‐added services to crowdfunding investors. Theoretical/Academic Implications: This study provides empirical support to the role of governance mechanisms at the platform level for differences in the level of financial literacy across countries. As such, it contributes to literature both on financial literacy and corporate governance. Additionally, it extends previous research in crowdfunding to the platform level. Practitioner/Policy Implications: This study calls for the attention of policymakers interested in the development of crowdfunding markets. The importance of financial literacy varies with the presence of governance mechanisms and information production at the platform‐level.