Institutional investors and post-ICO performance: an empirical analysis of investor returns in initial coin offerings (ICOs)

Christian Fisch*, Paul P. Momtaz

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

79 Citations (Scopus)

Abstract

We examine the role of institutional investors in initial coin offerings (ICOs). Taking a financial investor's perspective, we assess the determinants of post-ICO performance via buy-and-hold abnormal returns (BHAR) in a sample of 565 ICO ventures. Conceptually, we argue that institutional investors' superior screening (selection effect) and coaching abilities (treatment effect) enable them to partly overcome the information asymmetry of the ICO context and extract informational rents from their ICO investments. We find that institutional investor backing is indeed associated with higher post-ICO performance. Disentangling selection and treatment effects econometrically, we find that both of these effects explain the positive impact institutional investors have on post-ICO performance. Overall, our results highlight the importance of institutional investors in the ICO context.

Original languageEnglish
Article number101679
JournalJournal of Corporate Finance
Volume64
DOIs
Publication statusPublished - Oct 2020

Bibliographical note

JEL classification:G24, M13, O30
Funding Information:
We thank Silvio Vismara, participants at the 4th EntFin Conference (Trier, Germany), the University of Bergamo's research seminar (Bergamo, Italy), and the G-Forum 2019 (Vienna, Austria) for helpful comments on earlier versions of the manuscript. Momtaz gratefully acknowledges financial support for this project from the Price Center for Entrepreneurship and Innovation at UCLA.

Publisher Copyright:
© 2020 The Author(s)

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