 Institutions, regulations and initial coin offerings: An international perspectivePrabal Shrestha, Özgür Arslan-Ayaydin, James Thewissen and Wouter Torsin International Review of Economics & Finance, 2021, vol. 72, issue C, 102-120 Abstract: Investors and policy-makers still know little about the dynamics of initial coin offerings (ICOs) as a funding mechanism. Investors’ decisions to contribute to ICOs are essentially a leap of faith given ICOs’ decentralized nature coupled with the lack of regulatory oversight. Drawing on psychological theories on cognitive bias, we propose that one heuristic by which investors assess an ICO’s trustworthiness is the reputation of the ICO’s country of origin, which we proxy as institutional strength. Examining 2077 ICOs from 105 countries between 2015 and 2018, we find that ICOs originating in countries with stronger institutions are more likely to be traded, raise more funds, and experience lower price volatility. This relationship is particularly relevant for countries with no or few ICO regulations. Our results show that when faced with fewer regulations and higher uncertainty, investors use an ICO’s country of origin as a heuristic for the ICO’s unobserved trustworthiness. Keywords: Initial coin offerings; Trustworthiness; Behavioural finance; Heuristics; Regulation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:72:y:2021:i:c:p:102-120 DOI: 10.1016/j.iref.2020.10.014 Access Statistics for this article International Review of Economics & Finance is currently edited by H. Beladi and C. Chen More articles in International Review of Economics & Finance from Elsevier |
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