Riding the Blockchain Mania: Public Firms’ Speculative 8-K Disclosures

Forthcoming, Management Science

33 Pages Posted: 10 Jul 2019

See all articles by Stephanie F. Cheng

Stephanie F. Cheng

Tulane University - A.B. Freeman School of Business

Gus De Franco

Tulane University - A.B. Freeman School of Business

Haibo Jiang

Tulane University - A.B. Freeman School of Business

Pengkai Lin

Tulane University, A.B. Freeman School of Business, Students

Date Written: March 29, 2019

Abstract

This paper provides evidence on public firms’ initial 8-K disclosures that mention Blockchain and investors’ response to these disclosures. We categorize the description of Blockchain activities in firms’ 8-Ks as Speculative (e.g., a vague future plan that involves Blockchain) or Existing (e.g., a description of Blockchain product). We document a sharp increase in the number of initial 8-K disclosures of Blockchain, particularly by Speculative firms, coinciding with the rise of Bitcoin prices and excitement in Blockchain technology in the last quarter of 2017. Investors react positively to the Blockchain 8-Ks issued by Speculative firms in the initial seven-day event window, although the reaction is mostly reversed over the 30 days following the disclosure. The reaction is stronger when Bitcoin returns are more positive. Overall, our results are consistent with a situation that troubles the SEC and the financial press: investors overreact to a firm’s first 8-K disclosure of a potential foray into Blockchain technology and that the overreaction is a function of the Bitcoin price bubble.

Keywords: Blockchain, Bitcoin, SEC 8-K Filing, Disclosure, Market Mania

JEL Classification: M40, G30

Suggested Citation

Cheng, Stephanie F. and De Franco, Gus and Jiang, Haibo and Lin, Pengkai, Riding the Blockchain Mania: Public Firms’ Speculative 8-K Disclosures (March 29, 2019). Forthcoming, Management Science. Available at SSRN: https://ssrn.com/abstract=3371347 or http://dx.doi.org/10.2139/ssrn.3371347

Stephanie F. Cheng

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

Gus De Franco (Contact Author)

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

Haibo Jiang

Tulane University - A.B. Freeman School of Business ( email )

A.B. Freeman School of Business
7 McAlister Drive
New Orleans, LA 70118
United States
504-314-2492 (Phone)

Pengkai Lin

Tulane University, A.B. Freeman School of Business, Students ( email )

7 McAlister Drive
New Orleans, LA
United States

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