Experts or Charlatans? ICO Analysts and White Paper Informativeness

76 Pages Posted: 29 Oct 2018 Last revised: 22 Mar 2022

See all articles by David Florysiak

David Florysiak

University of Southern Denmark; Danish Finance Institute

Alexander Schandlbauer

University of Southern Denmark

Date Written: March 4, 2022

Abstract

White papers are likely the primary source of information provided to potential Initial Coin Offering (ICO) investors in platform-based ventures that may reduce information asymmetry between ICO issuers and investors. We use textual analysis to measure the information content of white paper documents. We examine how an informative white paper content signal and a concurrent potentially biased expert rating signal correlate with measures of ICO funding success, ICO underpricing, and post-ICO performance. Our empirical results suggest that high-quality ICO issuers signal their type by providing more informative white paper content, i.e., excess or new textual information not contained in recent and peer white papers. However, investors rely on the expert ratings signal in their decision to buy tokens that "jams" the white paper informative content signal. Once listed tokens receive a market valuation, white paper informative content is positively associated with our measures for underpricing, returns, and liquidity, while the expert ratings signal is rendered irrelevant.

Keywords: Initial coin offerings, white paper, textual analysis, information content, signaling, expert ratings, platform economy

JEL Classification: G30, M13, O16, K29, K40

Suggested Citation

Florysiak, David and Schandlbauer, Alexander, Experts or Charlatans? ICO Analysts and White Paper Informativeness (March 4, 2022). Journal of Banking and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3265007 or http://dx.doi.org/10.2139/ssrn.3265007

David Florysiak (Contact Author)

University of Southern Denmark ( email )

Campusvej 55
Odense, 5230
Denmark

Danish Finance Institute ( email )

Alexander Schandlbauer

University of Southern Denmark ( email )

Campusvej 55
Odense, 5230
Denmark

HOME PAGE: http://sites.google.com/site/alexanderschandlbauer/

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