The role of social media in equity-based crowdfunding in China: an empirical analysis based on signalling theory

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Li, Xiaolin (2022) The role of social media in equity-based crowdfunding in China: an empirical analysis based on signalling theory. PhD thesis, Victoria University.


Crowdfunding is an internet-based fund-raising tool. It brings together people who are seeking financial support from individuals or groups to launch new firms with funders who contribute a small amount each to the venture. As disruptive technology is a prevailing feature of the current digital era, crowdfunding has attracted substantial attention from academics, industry, and the public since its emergence. In the academic context, the debate of crowdfunding from scholars is principally revolved around the factors that impact the performance of crowdfunding. In all these identified factors, social capital, human capital, and intellectual capital have been highlighted by many as high value research and been recognized as positive signals to the equity crowdfunding performance in a signalling theory perspective in the relevantly mature western equity crowdfunding market. In addition, scholars have recognized the important role of social media in equity crowdfunding, since this unique online fundraising tool’s characteristic makes social media the only pathway for crowdfunding entrepreneurs, platforms, and investors to communicate with each other. While the related research is substantial in literature focusing on advanced economies, empirical evidence on the emerging Chinese equity crowdfunding industry is scarce. This study sought to filling in the gap by analyzing the determination of the equity crowdfunding performance in Chinese market, particularly the impacts of determinants on equity crowdfunds’ performance in terms of funding amount, funding speed, funding campaign completion time, and annual yield. The research adopts the theoretical framework developed by Ahlers, Cumming, Guenther, and Schweizer (2015), which consists of Social Capital, Human Capital and Intellectual Capital, to identify and analyse how effective signals are to the attraction of funds through social media in equity crowdfunding. The research question is: Does social media have, if any, impacts on the investors’ decisions in and the performance of crowdfunding projects? This project takes a quantitative research method, collects data from the leading Chinese equity-based crowdfunding platform ‘Colourful Investing’, and analyses the data employing multiple linear regression models in SPSS. Our sample includes one hundred and fifty-eight projects which have been hand-collected from the platform. The results confirm the signalling effect of equity crowdfunding entrepreneurs business education experience on the equity crowdfunding success, identifying that the promotion activity on social media by equity crowdfunding entrepreneurs and platform has a significant impact on the performance of equity crowdfunds, particularly the speed of equity crowdfunding campaigns and the annual yield rate of the equity crowdfunding campaigns. Besides, this result confirms the equity crowdfunding entrepreneur’s role of being a member of branded chain business on the campaign’s success. This study further compares the current regulations on equity crowdfunding in China and the corresponding laws and regulations in the western world and developed recommendations for policy and legal reforms in the future. The research findings answered the research question that: i. the social capital and human capital serve as positive signals in the Chinese equity crowdfunding market. ii. the promotion activity on social media platforms positively moderates the relationship between startup’s social capital and human capital and funding performance. iii. intellectual capital is not a statistically significant determinant of the Chinese equity crowdfunding market which is different from that in mature western equity crowdfunding market. iv. Furthermore, the findings suggest that the immaturity of equity crowdfunding market in China is due to the current ambitious legislation and policy situation. Hereby, policy implications are that the policy makers should pay attention on clarifying the disclosure obligations of financiers, setting reasonable threshold access for entrepreneurs, enhancing project management of the equity crowdfunding platform and the supervision of the platform. This study establishes empirical evidence of Social Media’s moderating effect on the performance of Equity Crowdfunding in China. The research fills in a gap relates to the absence of empirical research on the social media’s impact on equity-based crowdfunding performance in China. This is one of the first few studies to find that the founders’ experience of working in a branded Chain business improves the crowdfunding performance, which has not been stated by the existing equity crowdfunding discipline research and could be considered as a unique signal of equity crowdfunding performance under the nascent and unregulated Chinese equity crowdfunding industry It provides new insights into understanding the new-emerging equity crowdfunding industry in China in a signalling perspective with statistical evidence based on an empirical model. The study combines the views of both investors’ decision- making behaviour and entrepreneurs’ fundraising techniques which may serve as a basis for future research on the Equity Crowdfunding regulations in China.

Item type Thesis (PhD thesis)
Subjects Current > FOR (2020) Classification > 3502 Banking, finance and investment
Current > FOR (2020) Classification > 4801 Commercial law
Current > Division/Research > Institute for Sustainable Industries and Liveable Cities
Current > Division/Research > College of Law and Justice
Keywords crowdfunding, signalling theory, China, social media, equity crowdfunding campaigns, social capital, human capital, small and medium-sized enterprise, SMEs, financing
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