Protecting investors in equity crowdfunding: An empirical analysis of the small investor protection act

Research output: Contribution to journalResearch articleContributedpeer-review

Contributors

  • Maximilian Goethner - , Friedrich Schiller University Jena, IZA Institute of Labor Economics (Author)
  • Lars Hornuf - , University of Bremen, Max Planck Institute for Innovation and Competition, Munich Society for the Promotion of Economic Research - CESifo GmbH (Author)
  • Tobias Regner - , Friedrich Schiller University Jena (Author)

Abstract

During the past decade, equity crowdfunding (ECF) has emerged as an alternative funding channel for startup firms. In Germany, the Small Investor Protection Act became binding in July 2015, with the legislative goal to protect investors engaging in this new asset class. Since then, investors pledging more than 1,000 EUR now must self-report their income and wealth. Investing more than 10,000 EUR in a single ECF issuer is only possible through a corporate entity. We examine how the Small Investor Protection Act has affected investor behavior at Companisto, Germany's largest ECF portal for startup firms. The results show that after the new law became binding, sophisticated investors invest less on average while casual investors invest more. Moreover, the signaling capacity of large investments has disappeared.

Details

Original languageEnglish
Article number120352
Number of pages15
JournalTechnological Forecasting and Social Change: an International Journal
Volume162
Publication statusPublished - Jan 2021
Peer-reviewedYes
Externally publishedYes

External IDs

WOS 000601162500004
Scopus 85092687632
ORCID /0000-0002-0576-7759/work/142239289

Keywords

Keywords

  • Crowdinvesting, Equity crowdfunding, Investor protection

Library keywords