Investors' choices between cash and voting rights: evidence from dual-class equity crowdfunding

Douglas Cumming, Michele Meoli, Silvio Vismara

    Research output: Contribution to journalArticlepeer-review

    49 Citations (Scopus)
    216 Downloads (Pure)

    Abstract

    This paper examines for the first time dual-class equity crowdfunding as a digital ownership model. Unique to this context, companies can set an investment threshold under which no voting rights are granted, making the issuance of Class A vs. Class B shares, depending on individual investors. Using a sample of 491 offerings on the UK platform Crowdcube from 2011 to 2015, we find that a higher separation between ownership and control rights lowers the probability of success of the offering, the likelihood of attracting professional investors, as well as the long-run prospects. Different from small investors, professional investors care about the implementation of a threshold for the attribution of voting rights and often bid the Class A threshold exactly. Family businesses, although less attractive to small investors, are relatively safer investments, because of their lower chances of failure.
    Original languageEnglish
    Article number103740
    Number of pages19
    JournalResearch Policy
    Volume48
    Issue number8
    Early online date2 Apr 2019
    DOIs
    Publication statusPublished - Oct 2019

    Keywords

    • equity crowdfunding
    • crowdfunding
    • corporate governance
    • entrepreneurial finance
    • voting rights
    • ownership and control

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