Birds of a Feather Flock Together: The Inclusive Effect of Similarity Patterns in Equity Crowdfunding

Crowdfunding is helping to drive financial inclusion by expanding the availability of funds to traditionally excluded and underserved groups of individuals, such as ethnic minority and female entrepreneurs. This study verifies how ethnic and gender similarity between investor and entrepreneur can affect the invested amount in an equity crowdfunding campaign. Using an integrated approach with linear regression and Shapley decomposition, we analyze 8600 investments made by 5996 unique personal shareholder investors in 81 equity crowdfunding campaigns. Results show that similarity patterns seem to significantly influence the amount invested in a campaign but their effects change according to investor's gender and ethnic origin. In fact, even if female investors give a higher amount to men-led companies, their preference changes if the company is run by a female founder belonging to the same ethnic minority group. Results emphasize equity crowdfunding's potential as a tool for the financial inclusion of ethnic minority groups of investors and entrepreneurs.