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Initial Coin Offerings: Financing Growth with Cryptocurrency Token Sales

Author

Listed:
  • Sabrina T. Howell
  • Marina Niessner
  • David Yermack

Abstract

Initial coin offerings (ICOs) have emerged as a new mechanism for entrepreneurial finance, with parallels to initial public offerings, venture capital, and pre-sale crowdfunding. In a sample of more than 1,500 ICOs that collectively raise $12.9 billion, we examine which issuer and ICO characteristics predict successful real outcomes (increasing issuer employment and avoiding enterprise failure). Success is associated with disclosure, credible commitment to the project, and quality signals. An instrumental variables analysis finds that ICO token exchange listing causes higher future employment, indicating that access to token liquidity has important real consequences for the enterprise.

Suggested Citation

  • Sabrina T. Howell & Marina Niessner & David Yermack, 2018. "Initial Coin Offerings: Financing Growth with Cryptocurrency Token Sales," NBER Working Papers 24774, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:24774
    Note: CF LE PR
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    More about this item

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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