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Entrepreneurial incentives and the role of initial coin offerings

Rodney Garratt () and Maarten R.C. van Oordt

Journal of Economic Dynamics and Control, 2022, vol. 142, issue C

Abstract: This paper examines whether initial coin offerings (ICOs) are a beneficial form of financing with desirable economic properties. We do so by examining how financing a start-up via an ICO changes the incentives of an entrepreneur to exert effort to reduce cost. An ICO can result in a better or worse alignment of the interests of the entrepreneur and the investors compared with debt and venture capital financing. Notably, an ICO can be the only form of financing that induces optimal effort, and there are projects that should not take place unless they can be financed through an ICO.

Keywords: Valuation; Venture capital; Corporate finance; Initial coin offerings; Cryptocurrencies (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Entrepreneurial Incentives and the Role of Initial Coin Offerings (2019) Downloads
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DOI: 10.1016/j.jedc.2021.104171

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Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

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