Institutional Investors and Post-ICO Performance: An Empirical Analysis of Investor Returns in Initial Coin Offerings (ICOs)

58 Pages Posted: 30 Jul 2019 Last revised: 22 Jun 2020

See all articles by Christian Fisch

Christian Fisch

University of Luxembourg - Interdisciplinary Centre for Security, Reliability and Trust (SnT)

Paul P. Momtaz

University of California, Los Angeles (UCLA) - Anderson School of Management; Technische Universität München (TUM) - TUM School of Management; University College London Center for Blockchain Technologies

Date Written: March 12, 2020

Abstract

We examine the role of institutional investors in initial coin offerings (ICOs). Taking a financial investor’s perspective, we assess the determinants of post-ICO performance via buy-and-hold abnormal returns in a sample of 565 ICO ventures. Conceptually, we argue that institutional investors’ superior screening (selection effect) and coaching abilities (treatment effect) enable them to partly overcome the information asymmetry of the ICO context and extract informational rents from their ICO investments. We find that institutional investor backing is indeed associated with higher post-ICO performance. Disentangling the selection and treatment effects econometrically, we find that both of these effects explain the positive impact on post-ICO performance. Overall, our results highlight the importance of institutional investors in the ICO context.

Keywords: Initial coin offering, ICO, token sale, institutional investors, ICO performance, buy-and-hold abnormal returns, venture capital

JEL Classification: G24, M13, O30

Suggested Citation

Fisch, Christian and Momtaz, Paul P., Institutional Investors and Post-ICO Performance: An Empirical Analysis of Investor Returns in Initial Coin Offerings (ICOs) (March 12, 2020). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3427025 or http://dx.doi.org/10.2139/ssrn.3427025

Christian Fisch (Contact Author)

University of Luxembourg - Interdisciplinary Centre for Security, Reliability and Trust (SnT) ( email )

JFK Building
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Luxembourg, L-1885
Luxembourg

Paul P. Momtaz

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Technische Universität München (TUM) - TUM School of Management ( email )

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Munich, 80333
Germany

University College London Center for Blockchain Technologies ( email )

UCL CBT UCL Computer Science
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London, London
United Kingdom

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