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Equity crowdfunding: US Title II offerings using sentiment analysis

Bree Dority (University of Nebraska at Kearney, Kearney, Nebraska, USA)
Sarah J. Borchers (University of Nebraska at Kearney, Kearney, Nebraska, USA)
Suzanne K. Hayes (University of Nebraska at Kearney, Kearney, Nebraska, USA)

Studies in Economics and Finance

ISSN: 1086-7376

Article publication date: 10 February 2021

Issue publication date: 27 July 2021

330

Abstract

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.

Keywords

Acknowledgements

The authors would like to thank anonymous reviewers and the editor for their constructive comments.

Citation

Dority, B., Borchers, S.J. and Hayes, S.K. (2021), "Equity crowdfunding: US Title II offerings using sentiment analysis", Studies in Economics and Finance, Vol. 38 No. 4, pp. 807-835. https://doi.org/10.1108/SEF-04-2020-0097

Publisher

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Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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