LFIN Reprint 2024/16

A sense of risk: Responses to crowdfunding risk disclosures / Prabal Shrestha, James Thewissen, Özgür Arslan-Ayaydin, Annaleena Parhankangas. 
In: Strategic Entrepreneurship Journal, 2023, vol. 17(4), p. 925-970.

This paper examines how reward-based crowdfunding backers respond to risk disclosures. Combining theoretical frameworks from financial accounting with the risk perception literature, we adopt an abductive research approach to explore various nuances that influence backers' tolerance for risk information. In addition to identifying the general dynamics in backers' risk interpretation, we highlight the complexities introduced by differences in the disclosure's semantic content, expressed feelings, and the discloser's background attributes. Relying on a hierarchical Bayesian mixture model, we first identify a positive curvilinear relationship between risk information quantity and crowdfunding success. We then demonstrate the influences of what is disclosed, how it is disclosed, and who discloses it, while emphasizing the context-bound specificities of individual project types.