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The role of information signals in determining crowdfunding outcomes

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  • Kim, Jin-Hyuk
  • Newberry, Peter
  • Qiu, Calvin

Abstract

Crowdfunding platforms often display information signals about the funding activity of a project throughout the fundraising campaign. We assess the impact of two of these signals, the progress towards the project’s funding goal and the current number of backers, on project-level funding outcomes. Estimating a discrete-choice model of backer behavior and then conducting simulations under alternative information regimes, we find that, for both content-oriented (Film, Music, and Publishing) and product-oriented (Games, Technology, and Design) projects, the number of backers increases with the funding status and the backer volume. The difference between the two project types is that the number of backers decreases for content-oriented projects that have already reached their funding goal, while product-oriented projects see an increase in the number of backers after reaching the goal. Because of this, displaying the funding status information decreases (increases) the number of product (content)-oriented projects that are successfully funded.

Suggested Citation

  • Kim, Jin-Hyuk & Newberry, Peter & Qiu, Calvin, 2022. "The role of information signals in determining crowdfunding outcomes," Journal of Empirical Finance, Elsevier, vol. 67(C), pages 168-181.
    • Handle: RePEc:eee:empfin:v:67:y:2022:i:c:p:168-181
    DOI: 10.1016/j.jempfin.2022.03.006
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    More about this item

    Keywords

    Crowdfunding; Information; Herding; Platform;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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