https://orcid.org/0000-0002-3180-2722
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ABSTRACT
We analyze the influence of sustainability on the probability of achieving successful investment crowdfunding offerings. We use a sample of 1,741 investment crowdfunding offerings launched by 1,569 firms in the US during the period May 2016–September 2019 under the Form-C requirements of the JOBS Act. After accounting for potential endogeneity concerns affecting the degree of sustainability of each offering, results show that sustainability-related factors do not boost the chances of successful investment crowdfunding offerings. This result is not homogeneous across firms, operations, or financial environments. We obtain evidence on the influence of firm characteristics and on how offering affects the extent to which sustainability impacts success. Moreover, alternative funding sources and the market structure for funding portals also shape the influence of sustainability on offering success. Results are robust to considering both firm- and offering-level factors traditionally linked with success, as well as to different specifications of the econometric model, and to additional robustness tests.
Acknowledgement
We are grateful for financial support from the Professorship Excellence Program through the multi-year agreement signed by the regional government of Madrid and the Universidad Autónoma de Madrid (Line #3). I. Parra, Á. Rezola and N. Suárez express their thanks for the financial support provided by the Spanish Ministry of Economy and Competitiveness, Project PID2020-118064GB-I00 and the regional government of Madrid – UAM Research Project for Young Researchers, Project SI3-PJI-2021-00276. We thank P. de Andrés, G. de la Fuente, C. Salvador, F. Úbeda, and participants at the 1st Conference on International Finance; Sustainable and Climate Finance and Growth (Naples, 2022), and at the XXXI Congreso Nacional de ACEDE (Barcelona, 2022) for the insightful comments and suggestions.
Disclosure Statement
No potential conflict of interest was reported by the author(s)
Notes
1. Socially responsible investment consists of integrating personal values and social concerns into investment decisions (Berry and Junkus Citation2013).
2. Funding portals are crowdfunding intermediaries that must register with the SEC. For a complete list see: https://www.finra.org/about/firms-we-regulate/funding-portals-we-regulate.
3. For a definition of accredited investor and the limitations of retail investors see: https://www.sec.gov/oiea/investor-alerts-bulletins/ib_crowdfunding-.html.
4. The maximum offering amount under Form C was increased from $1.07 million to $5 million in March 2021.
5. This variable was collected from EM-DAT – The International Disasters Database (https://www.emdat.be).
6. In further robustness, we define QUICK25 as a dummy that identifies offerings that have raised capital during the first 25% of the total time available (0.4% of percentage of success in our sample), and 0 otherwise. The results hold completely and are available upon request.
7. EDGAR filings report specific information about the type of security issued in each offering. Specifically, we identify offerings that have issued equity, debt, convertible, or other kinds of assets. We leave for further robustness tests the distinction between equity security type and the common version of convertible securities in investment crowdfunding: The Simple Agreements for Future Equity (SAFE).
8. Appendix summarizes the variables used in our empirical analysis and offers a brief description and their sources.
9. It should be noted that the results are presented using the dummy SUCCESS, the key dependent variable in our analysis. The results hold when using the QUICK75 dummy. This set of results is available upon request.
10. Yearbook Data Pack (data provided by PitchBook).
11. As in the IV analysis, we use the occurrence of natural disasters as an instrument. The results are robust if the amount of capital injected by public authorities after a natural disaster is considered.