Conflicted Analysts and Initial Coin Offerings

University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute

There are 2 versions of this paper

Date Written: June 6, 2023

Abstract

This paper studies the contribution of analysts to the functioning and failure of the market for Initial Coin Offerings (ICOs). The assessments of freelancing analysts exhibit biases due to reciprocal interactions of analysts with ICO team members. Even favorably rated ICOs tend to fail raising some capital when a greater portion of their ratings reciprocate prior ratings. 90 days after listing on an exchange the market capitalization relative to the initial funds raised is smaller for tokens with more reciprocal ratings. These findings suggest that conflicts of interest help explain the failure of ICOs.

Keywords: Analysts, Asymmetric Information, Blockchains, Conflicts of Interest, FinTech, Initial Coin Offering (ICO)

JEL Classification: G14, G24, L26, D82, D83

Suggested Citation: Suggested Citation

Barth, Andreas and Laturnus, Valerie and Mansouri, Sasan and Wagner, Alexander F., Conflicted Analysts and Initial Coin Offerings (June 6, 2023). Management Science, forthcoming , Swiss Finance Institute Research Paper No. 21-26, LawFin Working Paper No. 7, Available at SSRN: https://ssrn.com/abstract=3720758 or http://dx.doi.org/10.2139/ssrn.3720758