John Donovan’s paper, "Financial Reporting and Entrepreneurial Finance: Evidence from Equity Crowdfunding," has been accepted for publication at Management Science. Here is the abstract:
I study the role of accounting and financial reporting in entrepreneurial finance by examining whether financial statement disclosure increases capital raised through equity crowdfunding. On average, I find a positive association between financial reporting and capital raised, suggesting that accounting reduces information asymmetry with potential investors. Additionally, the importance of financial reporting in equity crowdfunding varies predictably in the cross-section. Specifically, financial reporting is associated with greater capital raised when the firm has longer historical operations, during periods of higher macroeconomic uncertainty, and when complemented by detailed shareholder agreements. Finally, using a mediation analysis, I find evidence that financial reporting is indirectly associated with better ex-post performance by increasing the likelihood of raising capital. These results provide insight into the role of financial reporting in entrepreneurial finance and inform the ongoing debate over regulation and disclosure in the equity crowdfunding market.