Good News from Mass Media Induces More Investments in the Equity Crowdfunding Market

Felipe, Israel José dos Santos; Mendes-da-Silva, Wesley; Ali, Ismael; Francisco, Eduardo de Rezende

doi:10.1590/1807-7692bar2023210083

Israel José dos Santos Felipe

conceptualization

formal analysis

methodology

writing - original draft

writing - review & editing

Universidade Federal de Rio Grande do Norte, Programa de Pós-Graduação em Administração, Natal, RN, Brazil

https://orcid.org/0000-0001-8608-0029

Wesley Mendes-da-Silva

conceptualization

data curation

funding acquisition

supervision

writing - review & editing

Fundação Getulio Vargas, Escola de Administração de Empresas de São Paulo, São Paulo, SP, Brazil

https://orcid.org/0000-0002-5500-4872

Ismael Ali

formal analysis

methodology

software

visualization

University of Zakho, Department of Computer Science, Duhok, Kurdistan Region, Iraq

https://orcid.org/0000-0002-4800-345X

Eduardo de Rezende Francisco

software

validation

visualization

Fundação Getulio Vargas, Escola de Administração de Empresas de São Paulo, São Paulo, SP, Brazil

https://orcid.org/0000-0001-8895-2089

Corresponding author: Israel José dos Santos Felipe Universidade Federal de Rio Grande do Norte, Av. Senador Salgado Filho, n. 3000, Campus Universitário, CEP 59078-900, Natal, RN, Brazil israeljfelipe@gmail.com

Conflict of Interests:

The authors have stated that there is no conflict of interest.

Editor-in-Chief:

Ivan Lapuente Garrido https://orcid.org/0000-0003-3741-7961 (Universidade do Vale do Rio dos Sinos, Brazil).

Associate Editor:

Anderson Mol https://orcid.org/0000-0001-5915-8070 (Universidade Federal do Rio Grande do Norte, Brazil).

Reviewers:

Kelmara Mendes Vieira https://orcid.org/0000-0002-8847-0941 (Universidade Federal de Santa Maria, Brazil), Frank Magalhães de Pinho https://orcid.org/0000-0002-5063-3389 (Universidade Federal de Minas Gerais, Brazil) and one anonymous reviewer.

Editorial assistants:

Kler Godoy and Simone Rafael (ANPAD, Maringá, Brazil).

Authors

Israel José dos Santos Felipe

Universidade Federal de Rio Grande do Norte, Programa de Pós-Graduação em Administração

Av. Senador Salgado Filho, n. 3000, Campus Universitário, CEP 59078-900, Natal, RN, Brazil

israeljfelipe@gmail.com

Wesley Mendes-da-Silva

Fundação Getulio Vargas, Escola de Administração de Empresas de São Paulo

Av. 9 de julho, n. 2029, Bela Vista, CEP 01313-902, São Paulo, SP, Brazil

mr.mendesdasilva@gmail.com

Ismael Ali

University of Zakho, Department of Computer Science

Zakho International Road, P. O. Box 12, Duhok, Kurdistan Region, Iraq

ismael.ali@uoz.edu.krd

Eduardo de Rezende Francisco

Fundação Getulio Vargas, Escola de Administração de Empresas de São Paulo

Av. 9 de julho, n. 2029, Bela Vista, CEP 01313-902, São Paulo, SP, Brazil

victor.erfrancisco@gmail.com

Variable	Variable definition
Value	Dependent variable represented by the natural logarithm of the value of a given investment in venture i.
Capital target	Relationship between the financing goal of the venture and the number of investors in this business. The financing goal of these projects was considered in this model because it should indicate the quality of the venture being offered and can serve as a tool to attract investors (Josefy et al., 2017Josefy, M., Dean, T. J., Albert, L. S., & Fitza, M. A. (2017). The role of community in crowdfunding success: Evidence on cultural attributes in funding campaigns to “save the local theater”. Entrepreneurship Theory and Practice, 41(2), 161-182. https://doi.org/10.1111/etap.12263 https://doi.org/10.1111/etap.12263... ; Mollick, 2014Mollick, E. (2014). The dynamics of crowdfunding: An exploratory study. Journal of Business Venturing, 29(1), 1-16. https://doi.org/10.1016/j.jbusvent.2013.06.005 https://doi.org/10.1016/j.jbusvent.2013.... ; Zvilichovsky et al., 2015Zvilichovsky, D., Inbar, Y., & Barzilay, O. (2015). Playing both sides of the market: Success and reciprocity on crowdfunding platforms. SSRN. https://doi.org/10.2139/ssrn.2304101 https://doi.org/10.2139/ssrn.2304101... ).
Anchor	Variable that indicates the presence of an anchor investor (dummy: 1 = yes; 0 = no), that is, one with more experience in investing in high-risk businesses (a proxy for project credibility). According to the literature, the presence of these individuals or other reliable intermediaries can stimulate greater investments in businesses (Alexy et al., 2012Alexy, O. T., Block, J. H., Sandner, P., & Ter Wal, A. L. (2012). Social capital of venture capitalists and start-up funding. Small Business Economics, 39(4), 835-851. https://www.jstor.org/stable/41682944 https://www.jstor.org/stable/41682944... ).
Gender	Dummy variable that informs the gender of the entrepreneur (dummy: 1 = male; 0 = female), or in other words, the entrepreneur who is offering the investment opportunity. This variable was incorporated in the model that investigates the value of ECF investments because it is believed that, in the same way as occurs with venture capital and traditional sources of financing, the gender of entrepreneurs can limit their access to the desired amount of capital (Barasinska & Schäfer, 2014Barasinska, N., & Schäfer, D. (2014). Is crowdfunding different? Evidence on the relation between gender and funding success from a German peer-to-peer lending platform. German Economic Review, 15(4), 436-452. https://doi.org/10.1111/geer.12052 https://doi.org/10.1111/geer.12052... ).
Negative news	Variable that represents the negative sentiment of the investor due to news items published on the day they occurred to the i ^th investment operation.
Positive news	Characterizes a positive text sentiment given the publishing of a news item regarding a venture on a day in which an investment was confirmed for a venture. These variables were developed through a programming language designed to extract the linguistic content of news items related to investor sentiment.
Category	Dummy variable that represents the category of the analyzed ventures, which were divided into businesses associated with goods or services. Dummy: 1 = good; 0 = service.
Stage	Dummy variable that indicates the stage of a venture that is seeking financing through ECF, namely expansion (for an existing business) or validation (for a new business). Dummy: 1 = expansion; 0 = validation.

Quantitative variables	Avg.	Std. Dev.	Min.	Max.
Value (R$)	9,815.90	30,115.57	1,000.00	660,000.00
Target capital (R$)	9,619.00	7,575.25	3,797.47	40,000.00
Dummy variables	Percentage	Std. Dev.
Anchor	0.68	0.47
Gender	0.81	0.39
Category	0.30	0.46
Stage	0.84	0.36

	Words with greatest effects				Words with smallest effects
	Occurrences	News Items	Term weight		Occurrences	News Items	Term weight
Panel A: Positive words
Support	38	29	70.72	Guarantee	4	4	16.92
Value	18	16	44.81	Legitimacy	3	3	11.68
Growth	17	11	42.8	Development	2	2	9.85
Investments	14	12	39.55	Recovery	2	2	8.75
Democracy	13	7	31.32	Sharing	1	1	5.62
Panel B: Negative words
Lawsuit	89	53	106.71	Unemployment	5	3	15.79
Crisis	45	37	71.17	Fraud	3	3	13.55
Spending	34	24	64.86	Illegal	3	2	12.15
Fall	25	17	51.69	Uncertain	2	1	7.21
Risk	18	14	44.32	Chaos	1	1	4.89

	Model I	Model II	Model III	Model IV	Model V
Companies’ attributes
Target capital	0.420***	0.439***	0.390***	0.411***	0.439**
	(0.092)	(0.092)	(0.093)	(0.094)	(0.135)
Anchor	0.495***	0.521***	0.502***	0.527***	0.607**
	(0.084)	(0.085)	(0.084)	(0.085)	(0.203)
Gender	-0.139	-0.284**	-0.158	-0.294**	-0.238
	(0.113)	(0.120)	(0.113)	(0.120)	(0.212)
Sentiment of news
Negative news	-0.002	-0.002	-0.002	-0.002	-0.002
	(0.002)	(0.002)	(0.002)	(0.002)	(0.005)
Positive news	0.007*	0.007*	0.007*	0.008**	0.012
	(0.004)	(0.004)	(0.004)	(0.004)	(0.008)
Inverse Mills ratio
Lambda					1.838
					(2.005)
Controls
Category		-0.237***		-0.226**	0.502
		(0.089)		(0.089)	(0.816)
Stage			0.192**	0.177*	0.159
			(0.097)	(0.097)	(0.205)
Fixed effects (year)	Yes	Yes	Yes	Yes	Yes

Constant	4.324***	4.303***	4.426***	4.399***	3.380*
	(0.812)	(0.814)	(0.814)	(0.815)	(1.492)
R²	0.132	0.139	0.137	0.143
Adj. R²	0.125	0.132	0.128	0.134
Wald Chi²					40.28***
AIC	2,023.7	2,019.2	2,021.9	2,018.1
N	736	736	736	736	608

	OLS
	I	II	III	IV	GWR^(a)
Companies’ attributes
Target funding	0.294***	0.327***	0.273***	0.306***	[0.268 ; 0.316]
	(0.099)	(0.096)	(0.097)	(0.094)
Anchor	0.300***	0.297***	0.288***	0.284***	[0.264 ; 0.350]
	(0.109)	(0.109)	(0.108)	(0.108)
Geography
Distance	-0.033**	-0.037**	-0.038**	-0.037**	[-0.041 ; -0.034]
	(0.016)	(0.016)	(0.016)	(0.016)
Controls
Category	Yes	Yes	No	No	No
Stage	Yes	No	Yes	No	No
Constant	5.573***	5.433***	5.729***	5.594***	[5.506 ; 5.903]
	(0.849)	(0.843)	(0.837)	(0.832)
AIC	1,057.3	1,057.0	1,056.5	1,056.4	1,051.31
R²	0.07	0.07	0.07	0.07
Adj. R²	0.08	0.08	0.08	0.08
Quasi-global R²					0.09
N	393	393	393	393	393

[1] Corresponding author: Israel José dos Santos Felipe Universidade Federal de Rio Grande do Norte, Av. Senador Salgado Filho, n. 3000, Campus Universitário, CEP 59078-900, Natal, RN, Brazil israeljfelipe@gmail.com

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Good News from Mass Media Induces More Investments in the Equity Crowdfunding Market

ABSTRACT