De-Crypto-ing Signals in Initial Coin Offerings: Evidence of Rational Token Retention

Tetiana Davydiuk (), Deeksha Gupta () and Samuel Rosen ()
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Tetiana Davydiuk: Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213
Deeksha Gupta: Carey Business School, Johns Hopkins University, Baltimore, Maryland 21202
Samuel Rosen: Fox School of Business, Temple University, Philadelphia, Pennsylvania 19122

Management Science, 2023, vol. 69, issue 11, 6584-6624

Abstract: Using the market for initial coin offerings (ICOs) as a laboratory, we provide evidence that entrepreneurs use retention to alleviate information asymmetry. The underlying technology and the absence of regulation make the ICO market well suited to study this question empirically. Using a hand-collected data set, we show that ICO issuers that retain a larger fraction of their tokens are more successful in their funding efforts and are more likely to develop a working product. Moreover, we find that retention is a stronger signal when markets are crowded, and investors do not have as much time to conduct due diligence.

Keywords: asymmetric information; signaling; entrepreneurial financing; ICOs (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:69:y:2023:i:11:p:6584-6624

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