The cost of cheap talk: How campaign promises and default contributions affect donation-based crowd funding Success.

• Main Author: QIU, Tianci Leon
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2023
• Subjects: donation-based crowd funding; signaling theory; campaign promises; default contributions; cheap talk; Finance; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/etd_coll/532; https://ink.library.smu.edu.sg/context/etd_coll/article/1530/viewcontent/GPGM_AY2019_PhD_QIU_TIANCI__LEON.pdf
• Institution: Singapore Management University

Non-profit organisations (NPOs) find it increasingly harder to engage donors and raise funds from the public. Post-pandemic: the emphasis on tactics to raise funds online through donation-based crowdfunding (DCF) platforms has surged in importance for both NPO survival and continued beneficiary aid. However, unlike equity-based crowdfunding platforms where campaign organisers are obligated to provide investors with tangible returns based on funding milestones, NPOs on DCF platforms do not have to adhere to any funding milestones or are beholden to any tangible obligations towards donors. Consequently, NPOs are greatly incentivised to deploy cheap talk – non-binding, unverifiable messages and claims to persuade donors to give, thereby increase chances of crowding funding success. Specifically, we hypothesize that the rhetoric-based cheap talk of making campaign promises has a positive impact on funds raised, whereas the quantifiable cheap talk associated with suggesting high default contributions has a negative impact on funds raised. We also purport a positive interaction effect to exist between these two facets of cheap talk. Our empirical study based on campaign data from Singapore’s largest DCF platform supports these arguments.