Abstract
Recent regulatory approaches in crowdfunding democratize capital markets. Adverse wealth effects may arise because of information asymmetry. Firoozi et al. (2017) argue that crowdfunding has wealth-reducing effects on crowd investors because they systematically assign less value to good ventures, and more to bad ventures. This paper aims to take a more differentiated perspective by incorporating two dimensions of uncertainty determining ventures’ value. It further takes into account that different investor types learn different information. This yields new findings concerning the assessment of venture value by crowd investors and sophisticated investors. Crowd investors’ may be able to better assess venture value, even though they have inferior information processing skills. This may enable crowd investors to make better investment decisions, compared to sophisticated investors.
JEL Codes
D8, G14, G28, G32
Keywords
crowdfunding, crowd investors, sophisticated investors, wealth effects, information asymmetry
Recommended Citation
Bade, Marco
(2018)
"Assessing the Value of Ventures: Crowd Investors vs. Sophisticated Investors,"
The Journal of Entrepreneurial Finance:
Vol. 20:
Iss.
1, pp. 1-11.
DOI: https://doi.org/10.57229/2373-1761.1325
Available at:
https://digitalcommons.pepperdine.edu/jef/vol20/iss1/5
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial 4.0 License
Included in
Corporate Finance Commons, Entrepreneurial and Small Business Operations Commons, Finance and Financial Management Commons
