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Studies in Economics and Finance, Feb 10, 2021
Purpose This study aims to investigate how the language used in US Title II equity crowdfunding c... more Purpose This study aims to investigate how the language used in US Title II equity crowdfunding campaign descriptions relates to campaign success. Design/methodology/approach Data on >3,200 equity offerings from 12 Title II platforms was obtained from 2013 to 2016. The aspects of the campaign descriptions that are focused on are tone and two measures of readability: information quantity – the amount of information available to the investor and information quality – the ease of understanding of the passage of text. Tobit regressions with sector-clustered standard errors are used for estimation while controlling for company-specific variables, market sentiment and platform, regional, sector and time effects. Results are robust to alternative estimation approaches. Findings Inverse U-shaped relationships exist between information quantity, information quality and tone and Title II equity crowdfunding campaign success. Overall, less is more as it appears that an intermediate level of information – quantity, quality and tone – is optimal in terms of being a factor that contributes to equity crowdfunding campaign success. Originality/value Extends the use of textual analysis to the equity crowdfunding environment in the USA where such analysis is lacking and provides empirical evidence that the language used (e.g. sentiment) in US Title II equity-based crowdfunding campaign descriptions does influence campaign success. It provides empirical evidence of and extends the concept of information overload to the entrepreneurial finance sub-field and indicates tone may be an additional information attribute to consider in this context as contributing to overload.
Journal of Economics and Finance, Jan 28, 2022
Journal of Economics and Finance
Review of Economic and Business Studies, 2020
Equity crowdfunding (ECF) is a relatively new financing model in the United States (U.S). Many in... more Equity crowdfunding (ECF) is a relatively new financing model in the United States (U.S). Many investors and small business owners are exploring this new avenue of capital formation; however, it is a research area that is relatively unexplored due to the limited availability of data. This paper examines factors related to campaign funding success for companies seeking capital under Title II of the JOBS Act. Using a Tobit regression we find that firms which report their equity capitalization raise a higher percentage of their campaign ask. A lower minimum target amount is identified as a second factor related to funding success. This study also shows that firms not reporting a tagline raise a larger percent of their offer, underscoring the importance of quality text descriptions. In addition, we find that economic conditions such as equity market sentiment are important to ECF success.
Purpose This study aims to investigate how the language used in US Title II equity crowdfunding c... more Purpose This study aims to investigate how the language used in US Title II equity crowdfunding campaign descriptions relates to campaign success. Design/methodology/approach Data on >3,200 equity offerings from 12 Title II platforms was obtained from 2013 to 2016. The aspects of the campaign descriptions that are focused on are tone and two measures of readability: information quantity – the amount of information available to the investor and information quality – the ease of understanding of the passage of text. Tobit regressions with sector-clustered standard errors are used for estimation while controlling for company-specific variables, market sentiment and platform, regional, sector and time effects. Results are robust to alternative estimation approaches. Findings Inverse U-shaped relationships exist between information quantity, information quality and tone and Title II equity crowdfunding campaign success. Overall, less is more as it appears that an intermediate level of...
Studies in Economics and Finance, Feb 10, 2021
Purpose This study aims to investigate how the language used in US Title II equity crowdfunding c... more Purpose This study aims to investigate how the language used in US Title II equity crowdfunding campaign descriptions relates to campaign success. Design/methodology/approach Data on >3,200 equity offerings from 12 Title II platforms was obtained from 2013 to 2016. The aspects of the campaign descriptions that are focused on are tone and two measures of readability: information quantity – the amount of information available to the investor and information quality – the ease of understanding of the passage of text. Tobit regressions with sector-clustered standard errors are used for estimation while controlling for company-specific variables, market sentiment and platform, regional, sector and time effects. Results are robust to alternative estimation approaches. Findings Inverse U-shaped relationships exist between information quantity, information quality and tone and Title II equity crowdfunding campaign success. Overall, less is more as it appears that an intermediate level of information – quantity, quality and tone – is optimal in terms of being a factor that contributes to equity crowdfunding campaign success. Originality/value Extends the use of textual analysis to the equity crowdfunding environment in the USA where such analysis is lacking and provides empirical evidence that the language used (e.g. sentiment) in US Title II equity-based crowdfunding campaign descriptions does influence campaign success. It provides empirical evidence of and extends the concept of information overload to the entrepreneurial finance sub-field and indicates tone may be an additional information attribute to consider in this context as contributing to overload.
Journal of Economics and Finance, Jan 28, 2022
Journal of Economics and Finance
Review of Economic and Business Studies, 2020
Equity crowdfunding (ECF) is a relatively new financing model in the United States (U.S). Many in... more Equity crowdfunding (ECF) is a relatively new financing model in the United States (U.S). Many investors and small business owners are exploring this new avenue of capital formation; however, it is a research area that is relatively unexplored due to the limited availability of data. This paper examines factors related to campaign funding success for companies seeking capital under Title II of the JOBS Act. Using a Tobit regression we find that firms which report their equity capitalization raise a higher percentage of their campaign ask. A lower minimum target amount is identified as a second factor related to funding success. This study also shows that firms not reporting a tagline raise a larger percent of their offer, underscoring the importance of quality text descriptions. In addition, we find that economic conditions such as equity market sentiment are important to ECF success.
Purpose This study aims to investigate how the language used in US Title II equity crowdfunding c... more Purpose This study aims to investigate how the language used in US Title II equity crowdfunding campaign descriptions relates to campaign success. Design/methodology/approach Data on >3,200 equity offerings from 12 Title II platforms was obtained from 2013 to 2016. The aspects of the campaign descriptions that are focused on are tone and two measures of readability: information quantity – the amount of information available to the investor and information quality – the ease of understanding of the passage of text. Tobit regressions with sector-clustered standard errors are used for estimation while controlling for company-specific variables, market sentiment and platform, regional, sector and time effects. Results are robust to alternative estimation approaches. Findings Inverse U-shaped relationships exist between information quantity, information quality and tone and Title II equity crowdfunding campaign success. Overall, less is more as it appears that an intermediate level of...