[UTMD-077] Local Support or Structural Barriers? Unpacking Local Bias in Equity-Based Crowdfunding (by Keiichi Kawai, Akira Matsushita)

Keiichi Kawai, Akira Matsushita

We empirically show that local bias in equity-based crowdfunding (ECF) is driven by psychological factors such as hometown loyalty and regional pride, rather than structural barriers like informational asymmetry or geographic proximity. Using detailed user behavior data from Fundinno, Japan’s leading ECF platform, which captures the entire decision-making process—from viewing campaign snippets to accessing detailed pages and ultimately deciding whether to invest—we identify two distinct forms of local bias: (1) local-viewing bias, where users are more likely to view campaigns hosted in their home prefectures, and (2) local-investing bias, where users exhibit a stronger preference for investing in campaigns within their own prefectures, without extending this preference to adjacent prefectures. Notably, these biases are absent in the Tokyo Metropolitan Area (TMA). If structural barriers such as informational asymmetry or geographic proximity were the primary drivers of local bias, we would expect these patterns to persist or even be amplified in TMA, given its dense population and the scale of economic activity, which could heighten localized informational advantages or interactions. Instead, the absence of local bias in TMA, combined with the strict confinement of local-investing bias to prefectural borders in other regions, provides compelling evidence that these behaviors are better explained by psychological and cultural factors than by structural inefficiencies.