What has boosted crowdfunding’s growth? In the case of peer-to-peer (P2P) lending, we highlight the role of consumers’ distrust in banks. We offer evidence that distrust in banks likely triggers individuals to supply funding toward crowdfunding and away from bank deposits. We highlight that a distrust mindset promotes questioning default choices and considering alternatives, and fosters comparisons focusing on dissimilarities. Our findings suggest US states whose residents express greater distrust in banks are more likely to fund P2P loans and, conditional on funding, lend higher amounts. This relationship is more pronounced when funding small loans or borrowers with less banking access.

A vast digital ecosystem of entrepreneurship and exchange has sprung up with Bitcoin’s digital infrastructure at its core. We explore the worldwide spread of infrastructure necessary to maintain and grow Bitcoin as a system (Bitcoin nodes) and infrastructure enabling the use of bitcoins for everyday economic transactions (Bitcoin merchants). Specifically, we investigate the role of legal, criminal, financial, and social determinants of the adoption of Bitcoin infrastructure. We offer some support for the view that the adoption of cryptocurrency infrastructure is driven by perceived failings of traditional financial systems, in that the spread of Bitcoin infrastructure is associated with low trust in banks and the financial system among inhabitants of a region, and with the occurrence of country-level inflation crises. On the other hand, our findings also suggest that active support for Bitcoin is higher in locations with well-developed banking services. Finally, we find support for the view that bitcoin adoption is also partly driven by cryptocurrencies’ usefulness in engaging in illicit trade.

This study examines the financing of European SMEs during the 2007-2009 global financial crisis. We investigate firm-specific determinants of firms’ external financing applications and outcomes, distinguishing between various types of debt and equity instruments. Accounting for firms’ non-random willingness to seek additional outside capital, we mitigate sample selection biases and find that during the crisis, SMEs largely behave in accordance with the pecking-order theory. Innovative firms seek debt more, but innovativeness is only associated with successful search if SMEs are old or market-oriented, and not tech-intensive. Young firms with high investment needs had difficulties obtaining debt financing, but were more likely than average to succeed if applying for equity. Contrasting findings with a similar examination of the post-crisis period suggests that the crisis particularly disadvantaged such young, innovative firms with high investment needs to secure debt.

I investigate effects of funding rejections on firm investments and performance, through matching successful and observably-similar unsuccessful capital-seeking SMEs. This approach to disentangling supply-side from demand-side forces by exploiting realized application outcomes is novel and robust to substitution effects between sources of capital. I find evidence of firms’ investments being hampered due to inability to access capital in the crisis. Whereas liquidity helps absorb this supply shock, rejection makes firms less prone to use liquidity for investments in the post-crisis period. Reduced investment plans following rejection are a primary channel through which firm performance is lowered. Results imply that capital substitutions were not adequate to shield SMEs from crisis-era distress to creditor balance sheets.