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Crowdfunding: disintermediated investment banking

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  • Rubinton, Brian J

Abstract

This paper introduces crowdfunding as a concept and model for the evolution of investment banking. Crowdfunding, an application of crowdsourcing, is defined as one party’s attempt to finance a project by offering three types of investment opportunities to potential investors. The investment opportunities are donations, passive investments, and active investments. From this foundation I develop a model in which interdependent agents operate in a dynamic, discrete setting. Potential investors decide whether or not to invest in one of three opportunities each period while the entrepreneur sets the parameters of the game to maximize the probability of successful financing. I then simulate the model to analyze the effects changes in key parameters have on the results of the game.

Suggested Citation

  • Rubinton, Brian J, 2011. "Crowdfunding: disintermediated investment banking," MPRA Paper 31649, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:31649
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    File URL: https://mpra.ub.uni-muenchen.de/31649/1/MPRA_paper_31649.pdf
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    References listed on IDEAS

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    3. BELLEFLAMME, Paul & LAMBERT, Thomas & SCHWIENBACHER, Armin, 2011. "Crowdfunding: tapping the right crowd," LIDAM Discussion Papers CORE 2011032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Ieva Astrauskaitė & Arvydas Paškevičius, 2018. "An analysis of crowdfunded projects: KPI’s to success," Post-Print hal-01947861, HAL.
    2. Mäschle, Oliver & Dalvai, Wilfried, 2016. "Rationing and screening in crowdinvesting-markets," Thuenen-Series of Applied Economic Theory 142, University of Rostock, Institute of Economics.
    3. Schlegel, Friederike & Hakenes, Hendrik, 2014. "Tapping the Financial Wisdom of the Crowd - Crowdfunding as a Tool to Aggregate Vague Information," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100563, Verein für Socialpolitik / German Economic Association.
    4. Ivelin Elenchev & Aleksandar Vasilev, 2019. "Forecasting the Success Rate of Reward Based Crowdfunding Projects," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 17(1 (Spring), pages 51-77.
    5. Nazamul Hoque & Mohammad Hasmat Ali & Sirajul Arefeen & Md. Masrurul Mowla & Abdullahil Mamun, 2018. "Use of Crowdfunding for Developing Social Enterprises: An Islamic Approach," International Journal of Business and Management, Canadian Center of Science and Education, vol. 13(6), pages 156-156, April.
    6. Nathalie Duran & Djamchid Assadi, 2017. "Analyse comparative des discours gagnants et perdants du microcrédit : le cas des campagnes de crowdlending," Post-Print hal-01655509, HAL.
    7. Hossain Mokter & Oparaocha Gospel Onyema, 2017. "Crowdfunding: Motives, Definitions, Typology and Ethical Challenges," Entrepreneurship Research Journal, De Gruyter, vol. 7(2), pages 1-14, April.
    8. Ieva Astrauskaitė & Arvydas Paškevičius, 2018. "An analysis of crowdfunded projects: KPI’s to success," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 6(1), pages 23-24, September.
    9. Matteo Rossi, 2014. "The New Ways to Raise Capital: An Exploratory Study of Crowdfunding," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 5(2), pages 8-18, April.
    10. Bento, Nuno & Gianfrate, Gianfranco & Groppo, Sara Virginia, 2019. "Do crowdfunding returns reward risk? Evidences from clean-tech projects," Technological Forecasting and Social Change, Elsevier, vol. 141(C), pages 107-116.
    11. Roig Hernando, Jaume, 2016. "Crowdfunding: The collaborative economy for channelling institutional and household savings," Research in International Business and Finance, Elsevier, vol. 38(C), pages 326-337.
    12. Zhu, Lijing & Zhang, Qi & Lu, Huihui & Li, Hailong & Li, Yan & McLellan, Benjamin & Pan, Xunzhang, 2017. "Study on crowdfunding’s promoting effect on the expansion of electric vehicle charging piles based on game theory analysis," Applied Energy, Elsevier, vol. 196(C), pages 238-248.
    13. F. Levin, 2015. "Success Determinants Of Crowdfunding Projects," Review of Business and Economics Studies // Review of Business and Economics Studies, Финансовый Университет // Financial University, vol. 3(4), pages 79-87.

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    More about this item

    Keywords

    crowdfunding; crowdsourcing; network; finance; banking; relationship; evolution; investment; commercial; customer; participation;
    All these keywords.

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • P34 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Finance

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