Examining Funders’ Intention in Malaysian Equity Crowdfunding Platforms: Perceived Trust as a Mediator in an Extended Theory of Planned Behavior Framework

Abstract

Purpose: The objective of this paper is to examine factors that influence funders' intention to contribute to equity crowdfunding platforms through the role of perceived trust in Malaysia. Based on the Theory of Planned Behavior (TPB), this study incorporates motivational factors of intrinsic and extrinsic rewards to provide insight on what motivates Malaysian equity funders to contribute to crowdfunding platforms. Design/methodology/approach: Ex post facto research was adopted to address the objective of this study. Data was collected using a stratified random sampling technique and a 5-point Likert scale survey questionnaire were distributed online. From the disseminated questionnaire, data were obtained from seventy-six (76) potential investors actively participating in crowdfunding located around Selangor state, Malaysia. The empirical data gathered was analyzed using SmartPLS software utilizing the Partial Least Squares Structural Equation Modeling (PLS-SEM), to examine the relationships among the TPB constructs, and intention to contribute to equity crowdfunding platform. Findings: Extrinsic rewards were found to exert a strong influence on perceived trust, which subsequently creates a positive effect on funders’ intention to invest in a crowdfunding platform. Traditional TPB components, attitude, subjective norm, and perceived behavioral control, along with intrinsic rewards, failed to produce statistically significant results to funders’ intention however perceived trust emerged as a key mediator, confirming its vital role as a stimulator to increase funders’ intention in contributing to the equity crowdfunding platform. Practical implications: The findings highlight the need for building perceived trust to enhance funders’ interest in making contributions to equity crowdfunding platforms due to the perceived risk of high failure, as it involves startups or early-stage ventures. Besides, limited access to detailed financial information of startups makes trust a crucial psychological determinant for motivating contributions. Thus, emphasizing the tangible benefits may further improve funders’ retention and encourage participation in equity crowdfunding platforms. Originality/value – This study adds to the expanding literature on crowdfunding and equity crowdfunding by integrating the empirical factors essential for validating and encouraging investors’ participation in crowdfunding platforms into an innovative, inclusive, and flexible financial model. Additionally, since crowdfunding also serves as support platforms for social, cultural, and environmental causes, donors can directly support issues they care about, and innovators can develop high-impact solutions that mainstream funders might deem too risky.