Hard or Soft Information? The Informational Role of Imagery
58 Pages Posted: 7 Sep 2019 Last revised: 19 Nov 2019
Date Written: August 31, 2019
What is the incremental information in imagery? In this study we explore the impact of imagery on investor decision making and find that both the information content in images and their appeal convey valuable information to investors. Using a novel data set of equity crowdfunding campaign text descriptions, company logos, background images, and financial information from two major crowdfunding platforms as a natural testing ground, we find that the funds raised in crowdfunding transactions are in part affected by the imagery surrounding the transaction. After presenting two new dichotomies (reinforcement of textual information and appeal) to represent a new dimension in news that may be material in general to investors, we introduce an image processing and textual decoding methodology to extract the informational content of images and map their correspondence with the textual information content of written campaign descriptions. Our results show that pictorial representations with additive information content and certain appeal characteristics significantly affect investors,after controlling for sentiment and financial information. Finally, investor size and the stage of project funding completion are shown to be significant determinants in the analysis. The methodology we develop in this paper provides the groundwork for a new framework within which to discuss news, information and investor reactions in today’s digital and visual age.
Keywords: image quality, visual attention, hard and soft information, limited attention, adaptive expectations, textual analysis, machine learning, equity crowdfunding, classification
JEL Classification: G1
Suggested Citation: Suggested Citation