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
Date Written: October 1, 2018
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: Suggested Citation