The Information Content of ICO White Papers

70 Pages Posted: 29 Oct 2018 Last revised: 21 Jun 2019

See all articles by David Florysiak

David Florysiak

University of Southern Denmark; Danish Finance Institute

Alexander Schandlbauer

University of Southern Denmark

Date Written: June 21, 2019

Abstract

White papers are likely the most important source of information provided to potential ICO investors in platform-based ventures issuing utility tokens. We use textual analysis to measure the information content of white paper documents as a proxy for information asymmetry between ICO issuers and investors. Our comprehensive empirical evidence suggests that good type ICO issuers signal through the provision of excess or new textual information not contained in recent and peer white papers. Signaling is impaired during the ICO process as investors include potentially biased expert ratings in their investment decision-making. This results in good and bad type ICO issuers successfully raising funds and exchange-listing their tokens. Once tokens trade in the secondary market, the informative white paper content signal helps to separate good and bad ICO issuers but the expert rating do not. This generates adverse selection costs as not all good ICO issuers receive funding or refrain from tapping the token markets.

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

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

Suggested Citation

Florysiak, David and Schandlbauer, Alexander, The Information Content of ICO White Papers (June 21, 2019). 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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