Empirical Essays on Entrepreneurial Finance

This dissertation contains three chapters, covering analyses on crowdfunding, mutual fund, and entrepreneurial ecosystem. The chapters are connected at a theoretical level by the study of information asymmetries among financial intermediaries and the value added (or lack thereof) that intermediaries provide in different contexts.

The first essay on crowdfunding focuses on platform due diligence. Crowdfunding platform due diligence comprises background checks, site visits, credit checks, cross-checks, account monitoring, and third party proof on funding projects. I conjecture that due diligence is associated with the busyness of platform employees and sophistication of platform service indicated by fee structure. Due diligence screens lower quality projects and mitigates information asymmetries between project issuers and funders; it is associated with higher percentage of successful campaigns and larger amount of capital raised on platforms. I test these propositions with platform-level data and find strong supportive evidence.

The second essay on mutual fund studies agency problems associated with fund fee structure. Distinguishing between switches, pre-authorized contributions, systematic withdrawal plans, reinvestments, and distributions, I find that different types of flow exhibit distinct characteristics to retail fund flow with respect to fund fees and past performance. I argue that the positive correlation between retail fund inflow and switch-out reflects information asymmetry between incoming investors and current unitholders. I further show that this information asymmetry, attributed to biased purchase advice, is negatively associated with fund performance. A large sample of proprietary Canadian data from 2003 2014 support the findings.

The third essay on entrepreneurial ecosystem studies the joint impact of venture capitalist and technology parks on small business development. I argue two alternative routes that lead entrepreneurial start-ups to acquisition outcomes instead of liquidation. On one hand, acquisitions can come about through the control route with external financers such as venture capitalists (VCs). On the other hand, acquisitions can come about through more advice and support provided to the start-up, such as that provided by a technology park. Empirical analyses on a sample of 251 Crunchbase companies in the U.S. strongly support these propositions.