The Round Number Heuristic and Entrepreneur Crowdfunding Performance

62 Pages Posted: 16 Aug 2018 Last revised: 7 Jan 2021

See all articles by Tse-Chun Lin

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics

Vesa Pursiainen

University of St. Gallen; Swiss Finance Institute

Date Written: January 7, 2021

Abstract

We document a novel pattern that campaign goal amounts set by entrepreneurs on Kickstarter exhibit clear clustering at round numbers. We propose that the round number heuristic, a tendency to adopt round numbers as cognitive shortcuts when facing complicated and uncertain situations, may explain the clustering pattern and predict campaign outcomes. Based on 162,863 campaigns between 2009 and 2017, we find a negative relation between the use of round goal amounts and the likelihood of campaign success. Our findings suggest that setting a round number goal conveys useful information about entrepreneur quality that could be used by campaign backers or platforms.

Keywords: crowdfunding performance, round number heuristic, Kickstarter, fintech, entrepreneur

JEL Classification: D22, D81, D91, G23, G41, L26

Suggested Citation

Lin, Tse-Chun and Pursiainen, Vesa, The Round Number Heuristic and Entrepreneur Crowdfunding Performance (January 7, 2021). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3224543 or http://dx.doi.org/10.2139/ssrn.3224543

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Vesa Pursiainen (Contact Author)

University of St. Gallen ( email )

Swiss Institute of Banking and Finance
Unterer Graben 21
St.Gallen, 9000
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

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