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De-Crypto-ing Signals in Initial Coin Offerings: Evidence of Rational Token Retention

Author

Listed:
  • Tetiana Davydiuk

    (Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

  • Deeksha Gupta

    (Carey Business School, Johns Hopkins University, Baltimore, Maryland 21202)

  • Samuel Rosen

    (Fox School of Business, Temple University, Philadelphia, Pennsylvania 19122)

Abstract

Using the market for initial coin offerings (ICOs) as a laboratory, we provide evidence that entrepreneurs use retention to alleviate information asymmetry. The underlying technology and the absence of regulation make the ICO market well suited to study this question empirically. Using a hand-collected data set, we show that ICO issuers that retain a larger fraction of their tokens are more successful in their funding efforts and are more likely to develop a working product. Moreover, we find that retention is a stronger signal when markets are crowded, and investors do not have as much time to conduct due diligence.

Suggested Citation

  • Tetiana Davydiuk & Deeksha Gupta & Samuel Rosen, 2023. "De-Crypto-ing Signals in Initial Coin Offerings: Evidence of Rational Token Retention," Management Science, INFORMS, vol. 69(11), pages 6584-6624, November.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:11:p:6584-6624
    DOI: 10.1287/mnsc.2022.4631
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