Confidence and Capital Raising

Abstract

We investigate whether confidence of management teams, defined as the certainty about handling something, affects the capacity of firms to raise external capital. Drawing from psychology research, we run an experiment in which participants are asked to assess the confidence of management teams of 515 Initial Coin Offerings (ICOs) by appraising their pictures. Controlling for venture and offering characteristics, we find a positive association between confidence and the amount of fundraising. The results are robust to alternative estimation methods and to other visual traits, such as attractiveness and intelligence. Our study highlights the importance of utilizing images as a channel to communicate with prospective investors in alternative finance.

Keywords: Capital raising, confidence, initial coin offerings, ICOs, alternative finance

JEL Classification: G32, M13, O16