CROWDFUNDING, COST OF CAPITAL AND OPTIMAL BEHAVIOR OF AGRIBUSINESS FIRMS
DOI:
https://doi.org/10.22159/ijags.2022.v10i5.46482Keywords:
agribusiness, capital allocation, crowdfundingAbstract
This paper theoretically examines the viability of agribusiness crowdfunding, characterized by the promise of very high returns on investment (ROI) to subscribers. To do this, we develop a capital allocation model that analyzes the impact of the cost of capital on the optimal behavior of the agribusiness firm. Then, we compare this optimal behavior with the observed behavior of the firm (stylized facts), in this context of very high cost of capital. The model results show a significant behavioral bias with respect to optimality, which reflects the inability of the agribusiness firm to reasonably and legally serve very high ROIs to crowdfunding underwriters.The strategy of crowdfunding agribusiness via very high ROIs is therefore not economically viable, thus confirming the results of the financial audit carried out on this sector in Côte d'Ivoire.
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