Herding and the role of experts in equity crowdfunding markets

Conference Paper
Academy of Management Proceedings 2018(1), 16013
Authors

Jan Niklas Wick

Christoph Ihl

Published

August 2, 2018

Doi

10.5465/AMBPP.2018.16013abstract

Abstract
In online, crowd-based investment markets, nonexpert individuals collectively make investment decisions that were previously left to experts. Being carried out publicly on an online platform, the funding process gives these individuals opportunity to observe the actions of others before deciding themselves. Using a unique dyadic panel data set that tracks online, crowd-based investments into startups, we study how individuals are influenced in their investment decisions by prior actions of others. We find evidence that individuals engage in herd behaviour and are more likely to invest into campaigns exhibiting a higher funding momentum. Counterintuitively, investors are at the same time less likely to invest into campaigns that exhibit high counts of already committed investors, indicating that individuals do not herd after herd.

Research

© Anne Gärtner

  • Conference Paper
  • 2018
  • Vol. 2018(1)
  • DOI

Authors

Jan Niklas Wick, Christoph Ihl

Abstract

In online, crowd-based investment markets, nonexpert individuals collectively make investment decisions that were previously left to experts. Being carried out publicly on an online platform, the funding process gives these individuals opportunity to observe the actions of others before deciding themselves. Using a unique dyadic panel data set that tracks online, crowd-based investments into startups, we study how individuals are influenced in their investment decisions by prior actions of others. We find evidence that individuals engage in herd behaviour and are more likely to invest into campaigns exhibiting a higher funding momentum. Counterintuitively, investors are at the same time less likely to invest into campaigns that exhibit high counts of already committed investors, indicating that individuals do not herd after herd.

Tags

Crowdfunding Herding Expert Influence