The Role of 'Expert Reviewers' in Private Capital Markets
59 Pages Posted: 16 Nov 2020 Last revised: 19 Mar 2021
Date Written: October 20, 2020
We study initial coin offerings (ICOs) to understand how an unregulated market overcomes information frictions and conflicts of interest. Listing platforms both independently assess an offering and crowdsource information from "expert" reviewers. These experts provide more balanced textual reviews as they gain experience and receive positive feedback from the community, consistent with a reputation effect. We find that proceeds are higher when reviews are more positive even after controlling for both the reviewer's and platform's numerical rating. Finally, experts with greater potential conflicts of interest are more positive than other reviewers, but investors identify these conflicts and discount their reviews.
Keywords: Private Markets, Information Asymmetry, Capital Raising, ICO, FinTech
JEL Classification: D82, G14, G20
Suggested Citation: Suggested Citation