The impact of governance signals on ICO fundraising success

Giancarlo Giudici () and Saman Adhami ()
Additional contact information
Giancarlo Giudici: Politecnico di Milano
Saman Adhami: Vienna Graduate School of Finance

Economia e Politica Industriale: Journal of Industrial and Business Economics, 2019, vol. 46, issue 2, No 7, 283-312

Abstract: Abstract The blockchain technology is one of the grand challenges for the governance of new entrepreneurial projects. Thanks to this decentralized mechanism of certification, teams are now able to organize Initial Coin Offerings (ICOs) and raise money on the Internet offering digital tokens, bypassing any screening or control from central entities and independent auditors. While many of the governance mechanisms applied in traditional venture financing do not apply to ICOs, contributors may rely ex ante on the quality of the team and on unaudited information disclosed in a ‘white paper’, ex post on the development on enforcing digital ‘smart contracts’. In this work we study the governance signals of ICO-backed projects (token rights, institutional setting, team quality), analyzing a sample of 935 offerings. We examine the relationship between governance issues and the fundraising success and we find that both the project team and advisory committee size is positively and significantly correlated with the success. When the fraction of tokens retained by insiders and managers is larger, the probability of fundraising success is also larger, but to a lower extent if the token gives access to a service (‘utility token’). Specific provisions about the future jurisdiction and incorporation of the project are not considered as a credible governance signal. On the contrary, past managerial experience of the proponents is a valuable asset for contributors.

Keywords: Initial Coin Offerings; Blockchain; Token offerings; Smart contracts (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
http://link.springer.com/10.1007/s40812-019-00118-w Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:epolin:v:46:y:2019:i:2:d:10.1007_s40812-019-00118-w

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/40812

DOI: 10.1007/s40812-019-00118-w

Access Statistics for this article

Economia e Politica Industriale: Journal of Industrial and Business Economics is currently edited by C. Cambini, M.G. Colombo, L. Piscitello, L. Rondi and A. Zanfei

More articles in Economia e Politica Industriale: Journal of Industrial and Business Economics from Springer, Associazione Amici di Economia e Politica Industriale
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().