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: 16 Mar 2020
Date Written: March 12, 2020
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: Suggested Citation