IDEAS home Printed from https://ideas.repec.org/a/bla/finmgt/v50y2021i3p727-746.html
   My bibliography  Save this article

Blockchain speculation or value creation? Evidence from corporate investments

Author

Listed:
  • Don M. Autore
  • Nicholas Clarke
  • Danling Jiang

Abstract

Many corporate executives believe blockchain technology is broadly scalable and will achieve mainstream adoption, yet there is little evidence of significant shareholder value creation associated with corporate adoption of blockchain technology. We collect a broad sample of firms that invest in blockchain technology and examine the stock price reaction to the “first” public revelation of this news. Initial reactions average close to +13% and are followed by reversals over the next 3 months. However, we report a striking difference based on the credibility of the investment. Blockchain investments that are at an advanced stage or are confirmed in subsequent financial statements are associated with higher initial reactions and little or no reversal. The results suggest that credible corporate strategies involving blockchain technology are viewed favorably by investors.

Suggested Citation

  • Don M. Autore & Nicholas Clarke & Danling Jiang, 2021. "Blockchain speculation or value creation? Evidence from corporate investments," Financial Management, Financial Management Association International, vol. 50(3), pages 727-746, September.
    • Handle: RePEc:bla:finmgt:v:50:y:2021:i:3:p:727-746
    DOI: 10.1111/fima.12336
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/fima.12336
    Download Restriction: no
    File URL: https://libkey.io/10.1111/fima.12336?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Fama, Eugene F & French, Kenneth R, 1992. "The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-465, June.
    2. Mariana Khapko & Marius Andrei Zoican, 2017. ""Smart" Settlement," Post-Print hal-01491563, HAL.
    3. Yukun Liu & Aleh Tsyvinski, 2018. "Risks and Returns of Cryptocurrency," NBER Working Papers 24877, National Bureau of Economic Research, Inc.
    4. Lin William Cong & Zhiguo He & Jiasun Li & Wei Jiang, 2021. "Decentralized Mining in Centralized Pools [Concentrating on the fall of the labor share]," The Review of Financial Studies, Society for Financial Studies, vol. 34(3), pages 1191-1235.
    5. Andrew Ang & Assaf A. Shtauber & Paul C. Tetlock, 2013. "Asset Pricing in the Dark: The Cross-Section of OTC Stocks," The Review of Financial Studies, Society for Financial Studies, vol. 26(12), pages 2985-3028.
    6. Ulf Brüggemann & Aditya Kaul & Christian Leuz & Ingrid M. Werner, 2018. "The Twilight Zone: OTC Regulatory Regimes and Market Quality," The Review of Financial Studies, Society for Financial Studies, vol. 31(3), pages 898-942.
    7. Lin William Cong & Ye Li & Neng Wang, 2021. "Tokenomics: Dynamic Adoption and Valuation [The demand of liquid assets with uncertain lumpy expenditures]," The Review of Financial Studies, Society for Financial Studies, vol. 34(3), pages 1105-1155.
    8. Easley, David & O'Hara, Maureen & Basu, Soumya, 2019. "From mining to markets: The evolution of bitcoin transaction fees," Journal of Financial Economics, Elsevier, vol. 134(1), pages 91-109.
    9. Michael Sockin & Wei Xiong, 2020. "A Model of Cryptocurrencies," NBER Working Papers 26816, National Bureau of Economic Research, Inc.
    10. Lin William Cong & Zhiguo He, 2019. "Blockchain Disruption and Smart Contracts," The Review of Financial Studies, Society for Financial Studies, vol. 32(5), pages 1754-1797.
    11. Rainer Böhme & Nicolas Christin & Benjamin Edelman & Tyler Moore, 2015. "Bitcoin: Economics, Technology, and Governance," Journal of Economic Perspectives, American Economic Association, vol. 29(2), pages 213-238, Spring.
    12. David Yermack, 2017. "Corporate Governance and Blockchains," Review of Finance, European Finance Association, vol. 21(1), pages 7-31.
    13. Dimson, Elroy, 1979. "Risk measurement when shares are subject to infrequent trading," Journal of Financial Economics, Elsevier, vol. 7(2), pages 197-226, June.
    14. Frank Yiannas, 2018. "A New Era of Food Transparency Powered by Blockchain," Innovations: Technology, Governance, Globalization, MIT Press, vol. 12(1-2), pages 46-56, Summer-Fa.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. André D. Gimenes & Jéfferson A. Colombo & Imran Yousaf, 2023. "Store of value or speculative investment? Market reaction to corporate announcements of cryptocurrency acquisition," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-31, December.
    2. Sharma, Prateek & Shukla, Dhirendra Mani & Raj, Alok, 2023. "Blockchain adoption and firm performance: The contingent roles of intangible capital and environmental dynamism," International Journal of Production Economics, Elsevier, vol. 256(C).
    3. Chen, Ka-Hin & Lai, Tze Leung & Liu, Qingfu & Wang, Chuanjie, 2022. "Beyond the blockchain announcement: Signaling credibility and market reaction," International Review of Financial Analysis, Elsevier, vol. 82(C).
    4. Haji Suleman Ali & Feiyan Jia & Zhiyuan Lou & Jingui Xie, 2023. "Effect of blockchain technology initiatives on firms’ market value," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-35, December.
    5. Gong, Zheng, 2021. "Can Digital Finance Promote the Technological Innovation of Agricultural Enterprises?—Evidence from NEEQ Companies in China," 2021 ASAE 10th International Conference (Virtual), January 11-13, Beijing, China 329419, Asian Society of Agricultural Economists (ASAE).
    6. Qilong Cao & Jinglei Li & Hongru Zhang & Yue Liu & Xun Luo, 2022. "Blockchain and Firm Total Factor Productivity: Evidence from China," Sustainability, MDPI, vol. 14(16), pages 1-15, August.
    7. Aharon, David Y. & Demir, Ender & Siev, Smadar, 2022. "Real returns from unreal world? Market reaction to Metaverse disclosures," Research in International Business and Finance, Elsevier, vol. 63(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gilles Hilary & Laura Xiaolei Liu, 2021. "Blockchain and Other Distributed Ledger Technologies in Finance," Springer Books, in: Raghavendra Rau & Robert Wardrop & Luigi Zingales (ed.), The Palgrave Handbook of Technological Finance, pages 243-268, Springer.
    2. Andrew Detzel & Hong Liu & Jack Strauss & Guofu Zhou & Yingzi Zhu, 2021. "Learning and predictability via technical analysis: Evidence from bitcoin and stocks with hard‐to‐value fundamentals," Financial Management, Financial Management Association International, vol. 50(1), pages 107-137, March.
    3. Bonaparte, Yosef & Bernile, Gennaro, 2023. "A new “Wall Street Darling?” effects of regulation sentiment in cryptocurrency markets," Finance Research Letters, Elsevier, vol. 52(C).
    4. Gryglewicz, Sebastian & Mayer, Simon & Morellec, Erwan, 2021. "Optimal financing with tokens," Journal of Financial Economics, Elsevier, vol. 142(3), pages 1038-1067.
    5. Bonaparte, Yosef, 2022. "Time horizon and cryptocurrency ownership: Is crypto not speculative?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    6. Dunbar, Kwamie & Owusu-Amoako, Johnson, 2022. "Cryptocurrency returns under empirical asset pricing," International Review of Financial Analysis, Elsevier, vol. 82(C).
    7. Cahill, Daniel & G. Baur, Dirk & (Frank) Liu, Zhangxin & W. Yang, Joey, 2020. "I am a blockchain too: How does the market respond to companies’ interest in blockchain?," Journal of Banking & Finance, Elsevier, vol. 113(C).
    8. Zimmerman, Peter, 2020. "Blockchain structure and cryptocurrency prices," Bank of England working papers 855, Bank of England.
    9. Wang, Qiyu & Chong, Terence Tai-Leung, 2021. "Factor pricing of cryptocurrencies," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    10. Jongsub Lee & Tao Li & Donghwa Shin, 2022. "The Wisdom of Crowds in FinTech: Evidence from Initial Coin Offerings," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 11(1), pages 1-46.
    11. Cong, Lin William & Li, Ye & Wang, Neng, 2022. "Token-based platform finance," Journal of Financial Economics, Elsevier, vol. 144(3), pages 972-991.
    12. Michael Sockin & Wei Xiong, 2023. "Decentralization through Tokenization," Journal of Finance, American Finance Association, vol. 78(1), pages 247-299, February.
    13. Dulani Jayasuriya Daluwathumullagamage & Alexandra Sims, 2020. "Blockchain-Enabled Corporate Governance and Regulation," IJFS, MDPI, vol. 8(2), pages 1-41, June.
    14. Prateek Saxena, 2020. "Comments on “Cellular Structure for a Digital Fiat Currency” — Cellular DFC Design: Technological Perspectives," World Scientific Book Chapters, in: Bernard Yeung (ed.), DIGITAL CURRENCY ECONOMICS AND POLICY, chapter 11, pages 103-109, World Scientific Publishing Co. Pte. Ltd..
    15. John M. Griffin & Amin Shams, 2020. "Is Bitcoin Really Untethered?," Journal of Finance, American Finance Association, vol. 75(4), pages 1913-1964, August.
    16. Li Guo & Wolfgang Karl Hardle & Yubo Tao, 2018. "A Time-Varying Network for Cryptocurrencies," Papers 1802.03708, arXiv.org, revised Nov 2022.
    17. Florysiak, David & Schandlbauer, Alexander, 2022. "Experts or charlatans? ICO analysts and white paper informativeness," Journal of Banking & Finance, Elsevier, vol. 139(C).
    18. Michael Sockin & Wei Xiong, 2021. "A Model of Cryptocurrencies," Working Papers 2021-67, Princeton University. Economics Department..
    19. Benedetti, Hugo & Kostovetsky, Leonard, 2021. "Digital Tulips? Returns to investors in initial coin offerings," Journal of Corporate Finance, Elsevier, vol. 66(C).
    20. Daniele Bianchi & Mykola Babiak, 2021. "A Factor Model for Cryptocurrency Returns," CERGE-EI Working Papers wp710, The Center for Economic Research and Graduate Education - Economics Institute, Prague.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:finmgt:v:50:y:2021:i:3:p:727-746. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/fmaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.