Information Cascades among Investors in Equity Crowdfunding

Finance studies on information cascades, usually in an initial public offering setting, typically differentiate between institutional and retail investors, as this is the only information available to potential backers. Information available through equity crowdfunding platforms includes details on individual investors as they may disclose information about themselves by linking their profile to social networks or websites. Using a sample of 132 equity offerings on Crowdcube in 2014, we show that information cascades among individual investors play a crucial role in crowdfunding campaigns. Investors with a public profile increase the appeal of the offer among early investors, who in turn attract late…