Document Type

Journal Article

Publication Title

British Accounting Review

Publisher

Elsevier

School

School of Business and Law

RAS ID

70340

Funders

2020 AFAANZ Research Grants

Comments

Cumming, D., Lan, Y., Shan, Y. G., & Zhang, J. (2024). Discretionary tone in reward-based crowdfunding: Do project owners talk their way to success?. The British Accounting Review. Advance online publication. https://doi.org/10.1016/j.bar.2024.101433

Abstract

This study examines the relationship between abnormal tone and project performance of reward-based crowdfunding (RBC) using the Kickstarter data from 2009 to 2020. We document a negative relationship between abnormal tone and the success of a project in the RBC campaign section, while a positive impact in the Risks and Challenges section. This outcome remains robust to a variety of sensitivity tests and after accounting for potential endogeneity concerns. Cross-sectional analyses reveal that the effect of abnormal tone in RBC on project success is contingent on project quality and legal jurisdiction. Further investigation of the concurrent effect of abnormal tone in the two sections shows that an increase in the discretionary tone, given that it is overly optimistic, has a negative effect on funding performance. Last, based on a machine learning Sent-Latent Dirichlet Allocation model, we explore up to 70 specific risk categories embedded in Kickstarter projects, and we find that eight of them are strongly and negatively associated with project success. Our paper provides valuable insights into the significance of disclosure and sheds light on the ongoing and increased regulations on crowdfunding platforms.

DOI

10.1016/j.bar.2024.101433

Creative Commons License

Creative Commons Attribution 4.0 License
This work is licensed under a Creative Commons Attribution 4.0 License.

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