Overcoming Asymmetric Information in the Crowdfunding Market

A Law and Economics Approach

2025
Buch

Verfasst von: Ana Odorović
Buchreihe: International Law and Economics
Verlag: Springer Nature Switzerland
Enthalten in: Springer Professional "Wirtschaft+Technik"; Springer Professional "Wirtschaft"

Über dieses Buch

Crowdfunding wird von Regulierungsbehörden und politischen Entscheidungsträgern weltweit zunehmend beachtet, doch die Reaktionen darauf sind aufgrund seiner hybriden Stellung zwischen direkter und zwischengeschalteter Finanzierung, diverser Geschäftsmodelle und begrenzter Belege für Marktversagen, die regulatorische Interventionen rechtfertigen würden, unterschiedlich. Dieses Buch bietet eine umfassende Analyse der Wechselwirkungen zwischen markt- und regulatorischen Mechanismen des Anlegerschutzes im Crowdfunding-Sektor und schlägt einen risikobasierten Regulierungsrahmen vor. Es vergleicht Crowdfunding mit herkömmlichen Finanzakteuren, untersucht, wie Informationsasymmetrie durch freiwillige Offenlegung, Emittentensignalisierung und Plattformgatekeeping angegangen wird, und untersucht die wirtschaftlichen Funktionen von Selbstregulierungsrahmen, die von Crowdfunding-Verbänden in Europa eingeführt werden. Das Buch wendet sich dann der Rolle des Gesetzes bei der Bewältigung von Restrisiken und der Berücksichtigung der Rolle der Weitervermittlung von Plattformen zu. Und schließlich präsentiert sie empirische Belege für die Auswirkungen der maßgeschneiderten Crowdfunding-Regulierung in Großbritannien auf die Marktergebnisse. Dieses Buch wird Wissenschaftler und Studenten der Rechts-, Wirtschafts- und Finanzwissenschaften ebenso ansprechen wie Regulierungsbehörden und politische Entscheidungsträger, die ein tieferes Verständnis der Crowdfunding-Märkte und ihrer Regulierung anstreben.

Mit KI übersetzt

Inhaltsverzeichnis

Frontmatter

Chapter 1. Introduction

Abstract

With the proliferation of crowdfunding business models, regulators worldwide have taken different approaches to strike a balance between supporting innovation and safeguarding investor protection. Yet little is known about the source and scope of market failures in crowdfunding, or the adequacy of various regulatory tools in addressing them. This chapter introduces the overarching question of the study: How do market-based and regulatory mechanisms complement each other in reducing information asymmetry and ensuring investor protection in crowdfunding? The aim is to provide an economics perspective on the optimal regulation of crowdfunding and to empirically assess the effects of adopting tailored crowdfunding rules. This chapter also clarifies the scope of the analysis and the methodological approach.

Ana Odorović

Chapter 2. Crowdfunding and ‘Disintermediation’

Abstract

This chapter analyses the resemblance of crowdfunding to traditional actors: financial intermediaries, information intermediaries (gatekeepers), and providers of entrepreneurial finance. Positioned between direct and indirect finance, platforms facilitate transactions without becoming contractual parties. Yet they often engage in activities such as screening, monitoring, and risk assessment—functions typically associated with financial intermediaries. Their role more closely resembles that of information gatekeepers, assuming functions of exchanges, brokers, underwriters, advisors, and rating agencies. The scope and depth of these services vary across crowdfunding models. However, the accumulation of multiple gatekeeping functions can dilute their quality and create tensions between them. Business crowdfunding also shares key features with traditional providers of entrepreneurial finance.

Ana Odorović

Chapter 3. Promises and Limitations of Market-Based Mechanisms in Crowdfunding

Abstract

This chapter analyses market-based mechanisms for overcoming information asymmetries in crowdfunding: voluntary disclosures, signalling, and platform gatekeeping. Drawing on a new framework for reviewing empirical evidence, the analysis shows that while investors respond to overall disclosure levels, they pay limited attention to hard data and place greater weight on soft data. Signals may substitute for or complement disclosures, particularly when verification is costly. However, signals valued in traditional finance are not equally appreciated by crowd investors, with social capital and information cascades proving especially influential. Platform gatekeeping involves various reintermediation services aimed at mitigating hidden information and hidden action, with their scope and intensity varying considerably across platforms.

Ana Odorović

Chapter 4. Self-Regulation in European Crowdfunding Markets

Abstract

This chapter examines the emergence of self-regulation in European crowdfunding markets through a comparative analysis of codes of conduct (CoCs) adopted by national and transnational industry associations. Drawing on economic theories of self-regulation, it develops a framework distinguishing between ‘coerced’ and ‘voluntary’ self-regulation, with the latter further divided into ‘club-like institutions’ and ‘reputation commons’. The institutional design of most CoCs supports the ‘reputation commons’ theory, evidenced by inclusive membership and weak enforcement mechanisms aimed at preserving collective reputation. A minority of CoCs—notably the Estonian example—exhibit club-like features. The content of CoC provisions also reveals perceived sources of market failure from the platforms’ perspective.

Ana Odorović

Chapter 5. The Residual Role of the Law: A Normative Approach to Crowdfunding Regulation

Abstract

This chapter examines the residual role of the law in light of the promises and limitations of market-based mechanisms for addressing information asymmetries. It outlines four regulatory approaches adopted globally: no regulation, the extension of rules for traditional intermediaries, regulatory experimentation, and bespoke regimes. Given the diversity of these rules, the chapter explores whether different crowdfunding models warrant distinct regulatory treatment. Key risk-related factors include the type of financial contracts brokered (e.g., loans vs. securities), the nature of fundraisers (consumers vs. businesses), and the reintermediation services offered by platforms. While advocating an encompassing regulatory framework, the chapter proposes a risk-based approach to reflect the growing complexity of platform roles—particularly as the source of information asymmetry shifts from fundraisers to the platforms themselves.

Ana Odorović

Chapter 6. Does a Bespoke Regulation Matter for Market Outcomes? Evidence from Equity Platforms in the UK

Abstract

This chapter presents an empirical analysis of changes in the UK equity crowdfunding market following the adoption of a bespoke regulatory regime on 1 April 2014. The analysis examines effects on the demand side (fundraisers), supply side (investors), and market outcomes. Post-regulation, campaigns exhibit stronger quality signals, greater investor participation, and higher success rates. However, regression analysis finds no significant effect of regulation on investor participation or campaign success once campaign characteristics are controlled, suggesting that fundraiser quality mediates the regulatory impact. Interestingly, average investment declines, particularly among new investors. This indicates that the new regime legitimises crowdfunding among a broader investor base, shifting its income or wealth distribution towards the left tail.

Ana Odorović

Chapter 7. Conclusion

Abstract

The overarching contribution of this study is a systematic account of the subtle interplay between market-based and regulatory solutions to information asymmetry in the crowdfunding market. It sheds light on long-standing debates in the law and economics literature concerning the limits of markets and the appropriate degree of legal intervention, using the unique case of crowdfunding—a setting in which largely unrestricted market forces have shaped market outcomes. The findings also contribute to the law and finance literature by examining the emergence, performance, and optimal regulation of new intermediaries in finance. Finally, the study adds to the growing body of empirical research on crowdfunding by analysing platform self-regulation and the effects of tailored rules on market outcomes. This chapter summarises these contributions and outlines directions for future research.

Ana Odorović

Titel: Overcoming Asymmetric Information in the Crowdfunding Market
Verfasst von: Ana Odorović
Verlag: Springer Nature Switzerland
Electronic ISBN: 978-3-032-04118-0
Print ISBN: 978-3-032-04117-3
DOI: https://doi.org/10.1007/978-3-032-04118-0

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Springer Professional

Über dieses Buch

Inhaltsverzeichnis

Frontmatter

Chapter 1. Introduction

Chapter 2. Crowdfunding and ‘Disintermediation’

Chapter 3. Promises and Limitations of Market-Based Mechanisms in Crowdfunding

Chapter 4. Self-Regulation in European Crowdfunding Markets

Chapter 5. The Residual Role of the Law: A Normative Approach to Crowdfunding Regulation

Chapter 6. Does a Bespoke Regulation Matter for Market Outcomes? Evidence from Equity Platforms in the UK

Chapter 7. Conclusion

Backmatter