Date of Award
1-1-2024
Document Type
Dissertation
Degree Name
Ph.D. in Business Administration
First Advisor
Kathleen Fuller
Second Advisor
Robert Van Ness
Third Advisor
Arup Ganguly
Relational Format
dissertation/thesis
Abstract
Minority and female entrepreneurs who have sought to raise capital in private (exempt) securities offerings in the U.S. have encountered a market in which they are substantially underrepresented. The most relied on exemption, Regulation D (Reg D), generally requires that investors meet wealth requirements. Such “accredited” investors may seek investment opportunities in networks from which minorities and women are excluded or that are biased against them. In 2012, the Securities and Exchange Commission created a new crowdfunding exemption (Reg CF) that was intended to improve access to capital for such disadvantaged entrepreneurs. Reg CF generally allows anyone to invest and firms to conduct offerings a website. I find that Black, Hispanic and Asian entrepreneurs are 1.5 to 3.5 times more likely than white entrepreneurs to choose Reg CF over Reg D. White female entrepreneurs are 40 percent more likely to choose Reg CF than are white male entrepreneurs. I find no evidence that entrepreneurs’ preference for crowdfunding rises in the share of local, same-race/ethnicity investors or that female entrepreneurs’ Reg CF preference rises in the female proportion of the local population. Their crowdfunding preference does not appear to be rewarded. Black entrepreneurs’ offerings are less likely to succeed than are white entrepreneurs under both exemptions. Non-white, Black, Hispanic and female entrepreneurs raise less in both markets than, respectively, white and white male entrepreneurs raise. I find no evidence that minority or female entrepreneurs fare better (or less worse) in terms of binary outcomes or the amount raised in the crowdfunding market. There is risk that Reg CF’s hoped-for democratizing effect may be a false lure that leads firms to choose an exemption that more burdensome and results in their paying more to raise less. Finally, there is no evidence that crowdfunding has, more generally, solved the perceived problem of small firms’ being practicably excluded from using other exemptions as most crowdfunding issuers have successfully raised capital under other exemptions.
Recommended Citation
Bullard, Mercer, "Race/Ethnicity and Gender Preferences in the Small Firm Exempt Offering Market" (2024). Electronic Theses and Dissertations. 2795.
https://egrove.olemiss.edu/etd/2795