How the tone of mass media news affects pledge amounts in reward crowdfunding campaigns

ABSTRACT

We study whether the tone of daily news in mass media as a proxy for market sentiment affects the typical daily pledge amount in reward crowdfunding campaigns. Based on unique data for over 350,000 pledges in reward crowdfunding campaigns from over 2,600 cities in Brazil, we find that market sentiment affects the willingness of backers to make larger pledges. Our unprecedented results reveal that good news induces larger pledges. The effect of tone on pledge amounts is inhibited by the geographic distance between the backer and entrepreneur and is reinforced by income inequality in the backer’s city.

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© 2022 International Council for Small Business

KEYWORDS:

• Natural language processing
• crowdfunding
• media
• investor sentiment

Acknowledgments

The authors wish to thank Roberto Borges Kerr, Gregory Pogue, Bruce Kellison, Cristiane C. Gattaz, Guilherme Tavares, Gabriel Souza, and Elin Merethe Oftedal for their comments and suggestions. We also acknowledge Eduardo Rezende Francisco, who provided support by making the figures we used in this paper. The authors would also like to acknowledge the suggestions received from the participants in the Research Seminar at the IC² Institute at the University of Texas at Austin in November 2017. The authors would especially like to thank the Brazilian reward crowdfunding platform, Catarse, which provided part of its operational campaign data. The authors also wish to acknowledge the professional work of anonymous editors and reviewers.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the CNPQ (47089420148); São Paulo Research Foundation (FAPESP) (17/09306-6); Coordenação de Aperfeiçoamento de Pessoal de Nível Superior do Brasil (CAPES) (001); and Portuguese Foundation for Science and Technology (03182/2020).