Equity crowdfunding and governance

A new paper by Douglas Cumming, Tom Vanacker and Shaker Zahra is forthcoming in Academy of Management Perspectives. In this paper, we depart from current equity crowdfunding research that focuses almost exclusively on the funding success and funding dynamics on platforms to study the effective governance of equity-crowdfunded (ECF) firms and how it relates to these firms’ success. We propose a conceptual model that identifies a multitude of governance mechanisms (e.g., internal or external and formal or informal) that potentially operate in equity crowdfunding markets to reduce adverse selection and moral hazard problems. Further, building on this framework, we offer a roadmap for future research that examines how different governance mechanisms may help in the selection and development of successful ECF firms.

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