Disclosure Readability in Unregulated Capital Markets: Evidence from Initial Coin Offerings

49 Pages Posted: 2 Aug 2022 Last revised: 15 Aug 2022

See all articles by Qing Burke

Qing Burke

Miami University of Ohio

Ben Li

University of Massachusetts

Chi Wan

University of Massachusetts Boston - Department of Accounting and Finance

Yakun Wang

The Chinese University of Hong Kong, Shenzhen - School of Management and Economics; Shenzhen Finance Institute

Date Written: July 27, 2022

Abstract

Initial coin offerings (ICOs) have emerged as a popular method to raise capital by startups. During the ICO process, issuers release white papers, which serve as the primary offering documents. Unlike traditional corporate disclosures, ICO disclosures are largely unregulated. We hypothesize that more-readable white papers reflect less information obfuscation by the issuers and are less cognitively costly for potential investors to process and understand, thus enabling the issuers to attract more funding. Utilizing a hand-collected global sample, we find that white paper readability is positively associated with the likelihood of being funded and the amount raised, and the positive association is more pronounced for ICOs that attract more attention from individual investors and for ICOs whose white papers contain fewer numbers or more jargon. Furthermore, we find ventures with more-readable white papers have better post-ICO performance. Overall, this paper enhances our understanding of disclosure readability in a burgeoning, unregulated market.

Keywords: initial coin offerings, crypto market, disclosure, readability

JEL Classification: G32, L26, M41

Suggested Citation

Burke, Qing and Li, Ben and Wan, Chi and Wang, Yakun, Disclosure Readability in Unregulated Capital Markets: Evidence from Initial Coin Offerings (July 27, 2022). Available at SSRN: https://ssrn.com/abstract=4173578 or http://dx.doi.org/10.2139/ssrn.4173578

Qing Burke

Miami University of Ohio ( email )

Oxford, OH 45056
United States

Ben Li

University of Massachusetts ( email )

Lowell, MA
United States

HOME PAGE: http://www.benli.net

Chi Wan (Contact Author)

University of Massachusetts Boston - Department of Accounting and Finance ( email )

Boston, MA 02125
United States

Yakun Wang

The Chinese University of Hong Kong, Shenzhen - School of Management and Economics ( email )

2001 Longxiang Road, Longgang District
Shenzhen, 518172
China

Shenzhen Finance Institute ( email )

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