Do crowdfunding returns reward risk? Evidences from clean-tech projects

The growing literature on crowdfunding has mostly focused on the determinants of campaigns success, as well as on the legal and macroeconomic drivers of the crowdfunding diffusion as a mean to finance innovative projects. Still there are scant evidences on whether the returns for crowdfunders are consistent with the risk profile of crowdfunded projects. By studying 365 European clean-tech projects which raised capital via crowdfunding, we show that once the country risk has been accounted for, the returns are not consistent with the risks related to the technology adopted by the projects. Behavioral factors like bounded rationality or the cultural dimension of investors may explain this apparent mispricing of risks. While projects' returns are, on average, negatively related to risks, we find that projects offering better risk-adjusted returns attract relatively larger average contributions. Our results have important implications for understanding the drivers of crowdfunding returns and its sustainability, and particularly for its diffusion as an instrument to foster the transition to a low-carbon economy.