Initial Coin Offerings: Early Evidence on the Role of Disclosure in the Unregulated Crypto Market
73 Pages Posted: 9 Jun 2018 Last revised: 27 Jul 2018
Date Written: July 2018
We provide initial descriptive evidence on the emerging crypto capital market, and use this unique unregulated setting to examine the role of disclosure for capital market outcomes. We analyze a comprehensive global sample of more than 750 initial coin offerings (“ICOs”) with data from April 2014 to May 2018 and find that the ICO market has emerged as a significant financing channel with over $13 billion raised by a diverse set of issuers from more than 50 countries. We also find that the likelihood of successfully raising funds is positively associated with issuers’ disclosure, the information environment, and hype. Further, weaker information environments are associated with higher crash risk, illiquidity, and volatility. Finally, we present evidence on the capital market benefits of new information intermediaries that have naturally evolved in this unregulated market to monitor and assess the quality of tokens issued in an ICO. Overall, our study provides novel and timely evidence on the role of disclosure in this completely unregulated capital market.
Keywords: initial coin offering, crypto-currency, crypto-token, crowdfunding, disclosure, unregulated markets
JEL Classification: G1, G2, G3, M4
Suggested Citation: Suggested Citation