Transparency, Governance, and Social Signalling in Digital Finance: Examining the Dynamics of Investor Confidence in Crowdfunding Ecosystems in Emerging Markets

Abstract

This study investigates the role of transparency, governance mechanisms, and social signalling in fostering investor confidence within Nigerian crowdfunding platforms. Using a theoretical foundation grounded in agency theory, institutional trust theory, and signalling theory, the research integrates simulated data analysis and empirical modeling to examine how disclosure practices, platform-level governance structures, and founder reputation jointly influence investor perceptions. The results reveal that transparency measures, such as cost disclosure and operational updates, significantly enhance investor trust, while robust governance practices, such as KYC/AML compliance and escrow mechanisms, further strengthen these effects. Additionally, social signalling and founder reputation were found to exert a strong positive impact on investor confidence, particularly when transparency is high, underscoring the complementary role of reputational capital in digital financing ecosystems. These findings highlight the importance of building credible trust mechanisms in Nigeria’s nascent crowdfunding sector, where institutional weaknesses and limited regulatory oversight pose challenges to sustainable growth. The study contributes to the literature on fintech, investor behaviour, and trust in emerging markets by offering theoretical and empirical insights into the drivers of confidence in digital financial platforms. Policy implications suggest that regulators and platform managers must enforce higher governance and disclosure standards while fostering accountability and reputation-enhancing strategies to strengthen crowdfunding’s role in inclusive finance.