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Bankruptcy of ECF-funded firms: Evidence from France

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  • Karima Bouaiss
  • Carine Girard-Guerraud
  • Constantin Zopounidis

Abstract

Based on signaling theory, we explore the relationship between equity crowdfunding (ECF) financing and firm bankruptcy. We compare data from 317 ECF campaigns carried out by 277 French firms between 2010 and 2018 with 304 investment rounds conducted by 220 French firms financed by venture capitalists (VCs). Compared to firms financed by VCs, there is a positive relationship between ECF-funded firms and their probability of bankruptcy. Nevertheless, the characteristics of ECF campaigns (running several campaigns and the participation of many investors) are negatively correlated with their probability of bankruptcy. Thus, our results show that the characteristics of ECF campaigns are signals that reduce the identified moral hazard problem of ECF-funded firms. 1

Suggested Citation

  • Karima Bouaiss & Carine Girard-Guerraud & Constantin Zopounidis, 2020. "Bankruptcy of ECF-funded firms: Evidence from France," Finance, Presses universitaires de Grenoble, vol. 41(3), pages 93-131.
    • Handle: RePEc:cai:finpug:fina_413_0093
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    Cited by:

    1. Kukk, Mari-Liis, 2022. "Predicting business failure after crowdfunding success: Are platforms the unsung heroes?," Journal of Business Venturing Insights, Elsevier, vol. 17(C).

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