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Store of value or speculative investment? Market reaction to corporate announcements of cryptocurrency acquisition

Author

Listed:
  • André D. Gimenes

    (Banco Bradesco SA (NYSE: BBD; B3: BBDC3))

  • Jéfferson A. Colombo

    (Getulio Vargas Foundation (FGV-EESP, Brazil))

  • Imran Yousaf

    (Wenzhou-Kean University
    Lebanese American University)

Abstract

In this study, we analyze the stock market reaction to 35 events associated with 32 publicly traded companies from six countries that have announced cryptocurrency acquisitions, selling, or acceptance as a means of payment. Our analysis focuses on traditional firms whose core business is unrelated to blockchain or cryptocurrency. We find that the aggregate market reaction around these events is slightly positive but statistically insignificant for most event windows. However, when we perform heterogeneity analyses, we observe significant differences in market reaction between events with high (larger CARs) and low cryptocurrency exposure (lower CARs). Multivariate regressions show that the level of exposure to cryptocurrency ("skin in the game") is a critical factor underlying abnormal returns around the event. Further analyses reveal that economically meaningful acquisitions of BTC or ETH (relative to firm's total assets) drive the observed effect. Our findings have important implications for managers, investors, and analysts as they shed light on the relationship between cryptocurrency adoption and firm value.

Suggested Citation

  • 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.
    • Handle: RePEc:spr:fininn:v:9:y:2023:i:1:d:10.1186_s40854-023-00539-6
    DOI: 10.1186/s40854-023-00539-6
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    More about this item

    Keywords

    Corporate cryptocurrency acquisition; Bitcoin; Cryptocurrency; Blockchain; Market reaction;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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