Determinants of Individual Investment Decisions in Investment-Based Crowdfunding

We investigate determinants of investment decisions in investment-based (equity and bond) crowdfunding campaigns, using a novel investment-, investor- and campaign-level database, where equity refers to investments in entrepreneurial start-ups and bonds to large real estate projects. We find that investors who have higher social interactions invest more. Social interactions are important in an equity crowdfunding context but do not affect participation in bond investments. This is consistent with the view that investors' social networks help reduce information asymmetry. Women invest less in the riskiest (equity) investments but more in safer ones (bonds). These findings are better explained by differences in risk aversion than differences in overconfidence between men and women. Overall, the findings contribute to the understanding of how investment-based crowdfunding can be a viable source of entrepreneurial finance and how entrepreneurs' campaign decisions affect investor participation in this new form of entrepreneurial finance.