The (Limited) Power of Blockchain Networks for Information Provision

Franke, B., Fritz, Q. G., & Stenzel, A. (2023). The (limited) power of blockchain networks for information provision. Management Science. https://doi.org/10.1287/mnsc.2023.4718

Posted: 5 Nov 2019 Last revised: 20 Sep 2023

See all articles by Benedikt Franke

Benedikt Franke

University of Würzburg - Business Administration & Economics

Qi Gao Fritz

SKEMA Business School

André Stenzel

Bank of Canada

Date Written: March 10, 2023

Abstract

We investigate the potential and limits of privacy-preserving corporate blockchain applications for information provision. We provide a theoretical model in which heterogeneous firms choose between adopting a blockchain application or relying on traditional third-party intermediaries to inform the capital market. The blockchain's ability to generate information depends on each firm's data profile and all firms' endogenous adoption decisions. We show that blockchain technology can improve the information environment and outperform traditional institutions, with firms' adoption decisions serving as a credible value signal and the application uncovering firm values by analyzing all participating firms' data. However, we also characterize an adverse mixed-adoption equilibrium in which neither of the two channels realizes its full potential and information provision declines not only for individual firms but also in aggregate. The equilibrium is a warning sign that has broad implications for policymakers' regulatory effort and investors' assessment of corporate blockchain applications.

Keywords: Blockchain, Disclosure, Information provision, Peer-to-peer, Technology adoption

JEL Classification: D21, D40, M41, M48

Suggested Citation

Franke, Benedikt and Gao Fritz, Qi and Stenzel, André, The (Limited) Power of Blockchain Networks for Information Provision (March 10, 2023). Franke, B., Fritz, Q. G., & Stenzel, A. (2023). The (limited) power of blockchain networks for information provision. Management Science. https://doi.org/10.1287/mnsc.2023.4718, Available at SSRN: https://ssrn.com/abstract=3475383 or http://dx.doi.org/10.2139/ssrn.3475383

Benedikt Franke (Contact Author)

University of Würzburg - Business Administration & Economics ( email )

Sanderring 2
Wuerzburg, D-97070
Germany

Qi Gao Fritz

SKEMA Business School ( email )

5 Quai Marcel Dassault,
Suresnes
Paris, 92150
France

André Stenzel

Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

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