Equity crowdfunding and financial literacy of individual investors in Japan
Purpose – This study aims to fill the gap in previous research that focuses on the superficial aspects of equity crowdfunding (ECF) campaigns and financial practices by examining financial literacy aspects, such as due diligence and valuation, in terms of factors that influence Japanese individual i...
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| Format: | Article |
| Language: | English |
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Emerald Publishing
2021-08-01
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| Series: | Journal of Capital Markets Studies |
| Subjects: | |
| Online Access: | https://www.emerald.com/insight/content/doi/10.1108/JCMS-03-2021-0007/full/pdf?title=equity-crowdfunding-and-financial-literacy-of-individual-investors-in-japan |
| _version_ | 1828147942206210048 |
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| author | Masatoshi Fujii Chie Hosomi Yoshiaki Nose |
| author_facet | Masatoshi Fujii Chie Hosomi Yoshiaki Nose |
| author_sort | Masatoshi Fujii |
| collection | DOAJ |
| description | Purpose – This study aims to fill the gap in previous research that focuses on the superficial aspects of equity crowdfunding (ECF) campaigns and financial practices by examining financial literacy aspects, such as due diligence and valuation, in terms of factors that influence Japanese individual investors' investments in ECF. Design/methodology/approach – The status of information disclosure in ECF campaigns is checked. In addition, the feasibility of the initial due diligence and valuation using this information is verified. Specifically, the lack of financial literacy hypothesis is developed and (1) expected market capitalization in the final fiscal year of the business plan and (2) expected returns on investment (IRR: internal rate of return) are estimated. Findings – ECF campaigns in Japan disclose information equivalent to that obtained by professional venture capitalists. Analysis of the disclosed business plan allows for initial due diligence and valuation. By contrast, due diligence reveals that some projects are unlikely to be listed even if their business plans are met, and others have low IRRs. In addition, a stock acquisition rights project, in which even professional investors are unable to calculate IRRs, is completed at the same rate as a common stock project; this suggests that individual investors lack financial literacy. Originality/value – Analyzing ECF from financial literacy aspects, such as due diligence and valuation, is unique. Such aspects are essential for private equity investments but have not been addressed in previous studies. |
| first_indexed | 2024-04-11T21:08:42Z |
| format | Article |
| id | doaj.art-48bdd0da040248c792efb2c44dc36e14 |
| institution | Directory Open Access Journal |
| issn | 2514-4774 |
| language | English |
| last_indexed | 2024-04-11T21:08:42Z |
| publishDate | 2021-08-01 |
| publisher | Emerald Publishing |
| record_format | Article |
| series | Journal of Capital Markets Studies |
| spelling | doaj.art-48bdd0da040248c792efb2c44dc36e142022-12-22T04:03:08ZengEmerald PublishingJournal of Capital Markets Studies2514-47742021-08-015152710.1108/JCMS-03-2021-0007668402Equity crowdfunding and financial literacy of individual investors in JapanMasatoshi Fujii0Chie Hosomi1Yoshiaki Nose2Graduate School of Business, Doshisha University, Kyoto, JapanGraduate School of Business, Doshisha University, Kyoto, JapanGraduate School of Business, Doshisha University, Kyoto, JapanPurpose – This study aims to fill the gap in previous research that focuses on the superficial aspects of equity crowdfunding (ECF) campaigns and financial practices by examining financial literacy aspects, such as due diligence and valuation, in terms of factors that influence Japanese individual investors' investments in ECF. Design/methodology/approach – The status of information disclosure in ECF campaigns is checked. In addition, the feasibility of the initial due diligence and valuation using this information is verified. Specifically, the lack of financial literacy hypothesis is developed and (1) expected market capitalization in the final fiscal year of the business plan and (2) expected returns on investment (IRR: internal rate of return) are estimated. Findings – ECF campaigns in Japan disclose information equivalent to that obtained by professional venture capitalists. Analysis of the disclosed business plan allows for initial due diligence and valuation. By contrast, due diligence reveals that some projects are unlikely to be listed even if their business plans are met, and others have low IRRs. In addition, a stock acquisition rights project, in which even professional investors are unable to calculate IRRs, is completed at the same rate as a common stock project; this suggests that individual investors lack financial literacy. Originality/value – Analyzing ECF from financial literacy aspects, such as due diligence and valuation, is unique. Such aspects are essential for private equity investments but have not been addressed in previous studies.https://www.emerald.com/insight/content/doi/10.1108/JCMS-03-2021-0007/full/pdf?title=equity-crowdfunding-and-financial-literacy-of-individual-investors-in-japanequity crowdfundingfinancial literacyirr (internal rate of return) |
| spellingShingle | Masatoshi Fujii Chie Hosomi Yoshiaki Nose Equity crowdfunding and financial literacy of individual investors in Japan Journal of Capital Markets Studies equity crowdfunding financial literacy irr (internal rate of return) |
| title | Equity crowdfunding and financial literacy of individual investors in Japan |
| title_full | Equity crowdfunding and financial literacy of individual investors in Japan |
| title_fullStr | Equity crowdfunding and financial literacy of individual investors in Japan |
| title_full_unstemmed | Equity crowdfunding and financial literacy of individual investors in Japan |
| title_short | Equity crowdfunding and financial literacy of individual investors in Japan |
| title_sort | equity crowdfunding and financial literacy of individual investors in japan |
| topic | equity crowdfunding financial literacy irr (internal rate of return) |
| url | https://www.emerald.com/insight/content/doi/10.1108/JCMS-03-2021-0007/full/pdf?title=equity-crowdfunding-and-financial-literacy-of-individual-investors-in-japan |
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