Decentralized Governance and Digital Asset Prices

55 Pages Posted: 28 Feb 2023

See all articles by Ian Appel

Ian Appel

UVA Darden

Jillian Grennan

University of California, Berkeley, Haas School of Business, Institue for Business and Social Impact

Date Written: February 22, 2023

Abstract

Decentralized Autonomous Organizations ("DAOs'') are crypto-native organizations run without centralized management. Instead, managerial and financial decisions are made by token holders via a decentralized voting process. Taking advantage of the transparency of blockchains, we gather data on DAOs and 10,764 of their improvement proposals. We offer a novel classification of DAOs' objectives and governance structures. We also examine the relation between governance and performance. Aspects of governance that promote broad participation in decision-making or enhance security are associated with positive abnormal returns. Barriers to the adoption of improvement proposals are associated with negative abnormal returns. Overall, our findings provide some of the first evidence on the governance of this new organizational form.

Keywords: DAOs, cryptocurrency, blockchain, tokens, digital assets, decentralization, digital governance, Web3, FinTech, decentralized finance, DeFi, protocols, voting rights, cybersecurity, compliance, stablecoins, entrepreneurship, organizational economics, corporate governance, political economy

JEL Classification: O30, G34, M10, M50

Suggested Citation

Appel, Ian and Grennan, Jillian, Decentralized Governance and Digital Asset Prices (February 22, 2023). Darden Business School Working Paper No. 4367209, Available at SSRN: https://ssrn.com/abstract=4367209 or http://dx.doi.org/10.2139/ssrn.4367209

Ian Appel

UVA Darden ( email )

United States

Jillian Grennan (Contact Author)

University of California, Berkeley, Haas School of Business, Institue for Business and Social Impact ( email )

Berkeley, CA 94720
United States

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