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The Crowdfunding of Altruism

Author

Listed:
  • Luisa Faust

    (House of Finance, Goethe-University Frankfurt, Theodor-W.-Adorno-Platz 3, 60323 Frankfurt, Germany)

  • Maura Kolbe

    (House of Finance, Goethe-University Frankfurt, Theodor-W.-Adorno-Platz 3, 60323 Frankfurt, Germany)

  • Sasan Mansouri

    (House of Finance, Goethe-University Frankfurt, Theodor-W.-Adorno-Platz 3, 60323 Frankfurt, Germany)

  • Paul P. Momtaz

    (House of Finance, Goethe-University Frankfurt, Theodor-W.-Adorno-Platz 3, 60323 Frankfurt, Germany
    Anderson School of Management, University of California, Los Angeles, CA 90095, USA
    The Wharton School, University of Pennsylvania, Philadelphia, PA 19104, USA
    Center for Blockchain Technologies, Computer Science, University College London, London WC1E 6BT, UK)

Abstract

This paper introduces a machine learning approach to quantify altruism from the linguistic style of textual documents. We apply our method to a central question in (social) entrepreneurship: How does altruism impact entrepreneurial success? Specifically, we examine the effects of altruism on crowdfunding outcomes in Initial Coin Offerings (ICOs). The main result suggests that altruism and ICO firm valuation are negatively related. We, then, explore several channels to shed some light on whether the negative altruism-valuation relation is causal. Our findings suggest that it is not altruism that causes lower firm valuation; rather, low-quality entrepreneurs select into altruistic projects, while the marginal effect of altruism on high-quality entrepreneurs is actually positive. Altruism increases the funding amount in ICOs in the presence of high-quality projects, low asymmetric information, and strong corporate governance.

Suggested Citation

  • Luisa Faust & Maura Kolbe & Sasan Mansouri & Paul P. Momtaz, 2022. "The Crowdfunding of Altruism," JRFM, MDPI, vol. 15(3), pages 1-29, March.
    • Handle: RePEc:gam:jjrfmx:v:15:y:2022:i:3:p:138-:d:771385
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