Secondary market listings in equity crowdfunding: The missing link?
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A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä
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2023-01
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en
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22
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Research Policy, Volume 52, issue 1, pp. 1-22
Abstract
While the prevalence of equity crowdfunding has increased, investors have had very few opportunities to exit such investments. Thus, several equity crowdfunding platforms have started considering the development of secondary markets for buying and selling shares. Using detailed data from the world's first secondary market for equity crowdfunding, we investigate whether plans to list on the secondary market increase investor participation and thus the amount of money entrepreneurs raise during their equity crowdfunding campaigns. We find that in the early days of the secondary market, communicating a listing plan attracted more investors and larger investment sums. However, these effects largely disappeared after the first two years of secondary market operation. We interpret this to stem from investors' recognition of the insufficient liquidity of the secondary market and thus its probable inability to constitute a viable exit route. We also find that ex post, many entrepreneurs forgo listing, especially if their campaigns are not sufficiently successful, which implies significant costs associated with a listing. Our findings offer valuable insights to platforms aiming at launching secondary markets and regulators responsible for validating relevant initiatives. Specifically, we highlight how participation in equity ownership can be increased through well-functioning secondary markets, which however are difficult to achieve within equity crowdfunding.Description
Funding Information: The authors declare the following financial interests/personal relationships which may be considered as potential competing interests: Anna Lukkarinen reports financial support was provided by the Finnish Foundation for Share Promotion in form of a research grant.The authors wish to thank Guillaume Andrieu, Daniel Blaseg, Helen Bollaert, Alexander Groh, Lars Hornuf, Thomas Lambert, Benjamin Le Pendeven, Florencio Lopez-de-Silanes, Jukka Luoma, Markku Maula, Moritz Renner, and Mikko Rönkkö; the conference and seminar participants of the 3rd Toronto Fintech Conference (Ivey Business School, Toronto), the 4th European Alternative Finance Research Conference (European Center for Alternative Finance at Utrecht University), the Cryptocurrency Research Conference (ICMA Center at the University of Reading), and the MaCCI Conference on “Competition and the Regulation of Financial Innovation” (ZEW Mannheim); Audencia Business School, SKEMA Business School, and Aalto University; and Editor Martin Kenney and the three anonymous reviewers for their helpful comments and suggestions. Anna Lukkarinen gratefully acknowledges financial support from the Finnish Foundation for Share Promotion (Pörssisäätiö).
Keywords
Equity crowdfunding, Exit, Illiquidity risk, Secondary markets
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Citation
Lukkarinen, A & Schwienbacher, A 2023, ' Secondary market listings in equity crowdfunding: The missing link? ', Research Policy, vol. 52, no. 1, 104648, pp. 1-22 . https://doi.org/10.1016/j.respol.2022.104648