To read this content please select one of the options below:

Geographic proximity between lender and borrower: how does it affect crowdfunding?

Hakwoon Kim (Sungkyunkwan University, Jongno-gu, Korea (The Republic of Korea))
Jooyoung Kim (University at Albany State University of New York, Albany, New York, USA)

Review of Accounting and Finance

ISSN: 1475-7702

Article publication date: 13 November 2017

674

Abstract

Purpose

The purpose of this paper is to investigate the role of geographic distance in crowdfunding.

Design/methodology/approach

Under the assumption that investors are more likely to be attracted to local borrowers, this paper investigates whether this phenomenon is because of affinity or an informational advantage. The authors define a local investor as an investor who is from the same US state as the borrower.

Findings

The paper finds that loans offered by local investors have lower interest rates and a lower default probability. In addition, when the level of local investment is highest, the effects of informational advantage are strengthened.

Research limitations/implications

Overall, the evidence of this paper suggests that local investors have an informational advantage over more geographically distant investors.

Originality/value

This paper contributes to the ongoing debate regarding whether geographic distance continues to be important in the internet age.

Keywords

Citation

Kim, H. and Kim, J. (2017), "Geographic proximity between lender and borrower: how does it affect crowdfunding?", Review of Accounting and Finance, Vol. 16 No. 4, pp. 462-477. https://doi.org/10.1108/RAF-02-2016-0017

Publisher

:

Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited

Related articles