Transparency of Financial Information on Crowdfunding Platforms – A Prerequisite for Successful Funding Campaigns

Abstract

Crowdfunding, a relatively novel internet-based non-banking funding instrument for startups, innovative, creative or prosocial projects, implies that funders (donors or lenders) and fund seekers (project initiators) interact on a crowdfunding platform. The goal of fund seekers is to raise the necessary amount of money to finance their project, while donors are backers of business or research ideas, social causes or start-up companies. Existing research has proven that for a crowdfunding campaign to succeed, one condition is for the crowdfunding platform to provide the adequate technical functionalities that ensure sufficient financial information both during and after the campaign (such as how the money was used and how the money was returned if the project failed) but also the legal framework through a solid contract between the platform and the fund seeker that can prevent moral hazard of the latter. The purpose of this study is to perform a qualitative analysis of the active crowdfunding platforms in Romania in terms of financial information transparency and to determine whether they fulfil the necessary conditions to ensure fair use of donations by project initiators and distribution of reward to donors