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

(2019) RESEARCH POLICY. 48(8).
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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.
Keywords
Management of Technology and Innovation, Management Science and Operations Research, Strategy and Management, Equity crowdfunding, Crowdfunding, Corporate governance, Entrepreneurial finance, Voting rights, Ownership and control, INVESTMENT, FIRMS, GOVERNANCE, INNOVATION, OWNERSHIP, KNOWLEDGE, MARKETS, ISSUES, MODEL, BIAS

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Citation

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MLA
Cumming, Douglas, et al. “Investors’ Choices between Cash and Voting Rights : Evidence from Dual-Class Equity Crowdfunding.” RESEARCH POLICY, vol. 48, no. 8, 2019.
APA
Cumming, D., Meoli, M., & Vismara, S. (2019). Investors’ choices between cash and voting rights : evidence from dual-class equity crowdfunding. RESEARCH POLICY, 48(8).
Chicago author-date
Cumming, Douglas, Michele Meoli, and Silvio Vismara. 2019. “Investors’ Choices between Cash and Voting Rights : Evidence from Dual-Class Equity Crowdfunding.” RESEARCH POLICY 48 (8).
Chicago author-date (all authors)
Cumming, Douglas, Michele Meoli, and Silvio Vismara. 2019. “Investors’ Choices between Cash and Voting Rights : Evidence from Dual-Class Equity Crowdfunding.” RESEARCH POLICY 48 (8).
Vancouver
1.
Cumming D, Meoli M, Vismara S. Investors’ choices between cash and voting rights : evidence from dual-class equity crowdfunding. RESEARCH POLICY. 2019;48(8).
IEEE
[1]
D. Cumming, M. Meoli, and S. Vismara, “Investors’ choices between cash and voting rights : evidence from dual-class equity crowdfunding,” RESEARCH POLICY, vol. 48, no. 8, 2019.
@article{8651045,
  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.},
  articleno    = {103740},
  author       = {Cumming, Douglas and Meoli, Michele and Vismara, Silvio},
  issn         = {0048-7333},
  journal      = {RESEARCH POLICY},
  keywords     = {Management of Technology and Innovation,Management Science and Operations Research,Strategy and Management,Equity crowdfunding,Crowdfunding,Corporate governance,Entrepreneurial finance,Voting rights,Ownership and control,INVESTMENT,FIRMS,GOVERNANCE,INNOVATION,OWNERSHIP,KNOWLEDGE,MARKETS,ISSUES,MODEL,BIAS},
  language     = {eng},
  number       = {8},
  pages        = {19},
  title        = {Investors’ choices between cash and voting rights : evidence from dual-class equity crowdfunding},
  url          = {http://dx.doi.org/10.1016/j.respol.2019.01.014},
  volume       = {48},
  year         = {2019},
}

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