De-crypto-ing Signals in Initial Coin Offerings: Evidence of Rational Token Retention

Accepted at Management Science

96 Pages Posted: 6 Dec 2018 Last revised: 27 Dec 2022

See all articles by Tetiana Davydiuk

Tetiana Davydiuk

Johns Hopkins University - Carey Business School

Deeksha Gupta

Johns Hopkins University

Samuel Rosen

Temple University, Fox School of Business

Date Written: October 1, 2018

Abstract

Using the market for initial coin offerings (ICOs) as a laboratory, we provide evidence that entrepreneurs use retention to alleviate information asymmetry. The underlying technology and the absence of regulation make the ICO market well suited to study this question empirically. Using a hand-collected dataset, we show that ICO issuers that retain a larger fraction of their tokens are more successful in their funding efforts and are more likely to develop a working product. Moreover, we find that retention is a stronger signal when markets are crowded and investors do not have as much time to conduct due diligence.

Keywords: asymmetric information, signaling, entrepreneurial financing, ICOs

JEL Classification: D82, G32, L26

Suggested Citation

Davydiuk, Tetiana and Gupta, Deeksha and Rosen, Samuel, De-crypto-ing Signals in Initial Coin Offerings: Evidence of Rational Token Retention (October 1, 2018). Accepted at Management Science, Available at SSRN: https://ssrn.com/abstract=3286835 or http://dx.doi.org/10.2139/ssrn.3286835

Tetiana Davydiuk

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

Deeksha Gupta

Johns Hopkins University ( email )

Baltimore, MD 20036-1984
United States

Samuel Rosen (Contact Author)

Temple University, Fox School of Business ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States

HOME PAGE: http://sites.google.com/view/samuel-rosen/

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