Round-Number Bias in Investment: Evidence from Equity Crowdfunding

We examine whether uncertainty affects the use of round numbers in investment decisions. Using unique data of more than 15,000 investments from WiSEED?the largest equity crowdfunding platform in France?for the period 2009-2016, we find that investors are more likely to invest a round number when facing greater uncertainty in equity crowdfunding campaigns. As more investors pledge funds, the perceived uncertainty is reduced, which in turn reduces the use of round numbers by follow-up investors. This finding is consistent with the round-number bias. When investors no longer know the funding status of the ongoing campaign, experience helps reduce the round-number bias. This suggests the presence of a learning-by-doing phenomenon through experience: as investors become more familiar with equity crowdfunding investments, they are less prone to behavioral bias. These findings are consistent with behavioral theories of investment.