We provide evidence of perverse incentives in crowdfunding that are not fully recognized by the market
2016
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- This paper analyzes the substantially growing markets for crowdfunding, in which retail investors lend to borrowers without financial intermediaries
- Critics suggest that these markets allow sophisticated investors to take advantage of unsophisticated investors
- We provide evidence of perverse incentives in crowdfunding that are not fully recognized by the market
- We look at group leader bids in the presence of origination fees and find that these bids are perceived as a signal of good loan quality, resulting in lower interest rates
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