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The differential impact of corporate blockchain-development as conditioned by sentiment and financial desperation

Iulia Cioroianu, Shaen Corbet () and Charles Larkin ()

Journal of Corporate Finance, 2021, vol. 66, issue C

Abstract: This paper investigates how companies can utilise Twitter social media-derived sentiment as a method of generating short-term corporate value from statements based on initiated blockchain-development. Results indicate that investors were subjected to a very sophisticated form of asymmetric information designed to propel sentiment and market euphoria, that translates into increased access to leverage on the part of speculative firms. Technological-development firms are found to financially behave in a profoundly different fashion to reactionary-driven firms which have no background in ICT technological development, and who experience an estimated increased one-year probability of default of 170 bps. Rating agencies are found to have under-estimated the risk on-boarded by these speculative firms, failing to identify that they should be placed under an increased degree of scrutiny. Unfiltered market sentiment information, regulatory unpreparedness and mis-pricing by trusted market observers has resulted in a situation where investors and lenders have been compromised by direct exposure to an asset class becoming known for law-breaking activity, financial losses and frequent reputational damage.

Keywords: Investor sentiment; Blockchain; Leverage; Idiosyncratic volatility; Social media (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jcorpfin.2020.101814

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