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Crowdfunding as gambling: Evidence from repeated natural experiments

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  • Demir, Tolga
  • Mohammadi, Ali
  • Shafi, Kourosh

Abstract

Lenders in Prosper, one of the largest lending markets in the U.S., reduce their activity when playing multistate Powerball or Mega Millions lottery jackpot becomes attractive. This finding suggests that the desire for sensation seeking is an underlying motivation for participating in peer-to-peer crowdfunding markets; the thrill of winning a large lottery jackpot fulfills some lenders' desire for novelty and sensation seeking, thus decreasing their lending activity. We discuss our findings' implications for lenders, borrowers, platform organizers, and policymakers.

Suggested Citation

  • Demir, Tolga & Mohammadi, Ali & Shafi, Kourosh, 2022. "Crowdfunding as gambling: Evidence from repeated natural experiments," Journal of Corporate Finance, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:corfin:v:77:y:2022:i:c:s0929119921000262
    DOI: 10.1016/j.jcorpfin.2021.101905
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    More about this item

    Keywords

    Peer-to-peer lending; Crowdfunding; Lottery; Gambling; Fin-tech;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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