Decrypting Coin Winners: Disclosure Quality, Governance Mechanism and Team Networks

56 Pages Posted: 17 Oct 2018

See all articles by Xin Deng

Xin Deng

Shanghai University of Finance and Economics

Yen Teik Lee

National University of Singapore (NUS) - Department of Finance

Zhengting Zhong

Shanghai University of Finance and Economics, Students

Date Written: September 25, 2018

Abstract

Using a proprietary dataset of initial coin offerings (ICOs) and cryptocurrencies, we systematically examine whether disclosure quality, governance mechanisms, and team quality can differentiate legitimate ICO projects from fraudulent ones. The three fundamental factors positively affect ICO deal completion, ICO listing status, and the amount of raised capitals. In addition, we directly track entrepreneurs’ effort after fundraising activities using the post-ICO technological development. We find that while the three factors have the same positive effects, the team with strong influence, one sub-indicator of team quality, positively predicts ICO success but negatively correlates with the progress of development. These results suggest that ICO events are plausibly prone to coalitions of powerful players whose main objective is likely to be cashing out after ICO without pushing for the development of its purported project. Finally, we construct a token valuation measure and show that technological development and user base are two significant drivers of the token value.

Keywords: Blockchain, Cryptocurrency, Initial Coin Offering, Entrepreneurial Finance, Disclosure Quality, Governance Mechanism, Team Quality

Suggested Citation

Deng, Xin and Lee, Yen Teik and Zhong, Zhengting, Decrypting Coin Winners: Disclosure Quality, Governance Mechanism and Team Networks (September 25, 2018). Available at SSRN: https://ssrn.com/abstract=3247741 or http://dx.doi.org/10.2139/ssrn.3247741

Xin Deng (Contact Author)

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

Yen Teik Lee

National University of Singapore (NUS) - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

Zhengting Zhong

Shanghai University of Finance and Economics, Students ( email )

China

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