We examine stock price response around cryptocurrencyârelated corporate name change announcements using an event study framework. We find that cryptocurrencyârelated name changes generate larger gains in share price and volume than other corporate name changes. The valuation gains associated with cryptocurrencyârelated name changes cannot be explained by standard asset pricing factors, firm and stock characteristics, industry specific shocks, or by the presence of outliers. These gains are higher when the announcements happen during periods of high sentiment for cryptocurrencies. There is evidence that shareholders with better access to private information about such name changes are able to frontârun other shareholders.
This article presents a survey of broad-based stakeholder-ownership models for journalism. The models considered are forms of ownership by employees, associations, audiences, and blends of these. Some of the examples are so new that they have not been, and cannot yet be, comprehensively studied. Yet they bear unique promise for addressing the dual challenges of economic sustainability and perceived accountability that bedevil news media today. Such promise, however, does not guarantee success. While broad-based stakeholder ownership in the news business shows capacity for public accountability, as well as some promise for business sustainability, it is ill-equipped to compete in markets organized to favor investor-owners with far greater capital access. Such ownership models, therefore, will likely require additional policy support to gain and maintain significant market share.
Using data from one of the first and most popular decentralized lending protocols, MakerDao, we study whether computer-language-based information lends itself for the efficient use of information in a market that features real-time transparency. We first find that there is persistent cross-sectional difference in performance, where persistence increases with investors sophistication. We then study how different types of processing costs affect the extent to which investors use past loan performance to mimic experts in real time (i.e., efficient mimicking). Our results show that awareness costs, proxied by loan activity level, hinder efficient mimicking. More importantly, acquisition and integration costs associated with translating code-based information into useful trading signals impedes investorsâ ability to take advantage of information embedded in smart contracts. Our paper has important implications for regulators and practitioners aiming at more efficient use of information in smart contracts and on blockchain.
Victor von Wachter, Johannes Rude Jensen, Ferdinand Regner, Omri Ross
The smart contract-based markets for non-fungible tokens (NFTs) on the Ethereum blockchain have seen tremendous growth in 2021, with trading volumes peaking at 3.5b in September 2021. This dramatic surge has led to industry observers questioning the authenticity of on-chain volumes, given the absence of identity requirements and the ease with which agents can control multiple addresses. We examine potentially illicit trading patterns in the NFT markets from January 2018 to mid-November 2021, gathering data from the 52 largest collections by volume. Our findings indicate that within our sample 3.93% of addresses, processing a total of 2.04% of sale transactions, trigger suspicions of market abuse. Flagged transactions contaminate nearly all collections and may have inflated the authentic trading volumes by as much as 149,5m for the period. Most flagged transaction patterns alternate between a few addresses, indicating a predisposition for manual trading. We submit that the results presented here may serve as a viable lower bound estimate for NFT wash trading on Ethereum. Even so, we argue that wash trading may be less common than what industry observers have previously estimated. We contribute to the emerging discourse on the identification and deterrence of market abuse in the cryptocurrency markets.
The risk and return characteristics of NFT-based companies listed on the cryptocurrency market are investigated in this study. The current spike in NFT activity among creators, investors, and traders has prompted our inquiry. The study start by proposing a new classification system for existing NFTs, ranging from NFT blockchains to NFT metaverses to NFT. Next, the study show that NFTs. Earn 130 percent on the first day of trading; Have a long-term investment multiple of 40 (approximately 4,000 percent), which is four times larger than bitcoin; and have positive and strong alpha and above-average beta. The research also show that following the mid-2021 meltdown, the NFT portion of the cryptocurrency market leads market recovery and generates a return of about 350 percent. The paper's conclusion is that integrating NFT infrastructure into current blockchains increases the market value of these networks. Keywords: NFT, Cryptocurrency, Blockchain, Digital Currency, Binance.
Venture capital (VC) models can be optimized with emerging decentralized technology. There are many disadvantages that come with traditional VC fundraising including illiquidity and ownership struggles, as well as timing. This paper will discuss alternative funding mechanisms that may be available and advantageous to emerging businesses. After discussing the shortcomings of the existing VC market and the rise of alternative early round funding mechanisms, the paper highlights the evolution of VC businesses that are operated by a Decentralized Autonomous Organization (DAO). More specifically, models discussed in this article contribute to the much-needed experimentation with venture capital reputation models.
During the global financial crisis in 2008, trust in established financial intermediaries declined sharply. In reaction, blockchain technology was developed as an alternative system to facilitate financial transactions devoid of intermediaries. The application of blockchain in the financial sector brought a new paradigm called Decentralized Finance. Employing a modified technology acceptance model, our study aims at examining the relationship of distrust in financial intermediaries and consumerâs behavioral intention to use Decentralized Finance. Even though this relationship is well-documented regarding the motivation of the development of blockchain technology, as well as in cases of unstable financial systems, empirical data from our survey research does not support this relationship in the context of consumer adoption. Our study contributes to the theory on the foundations of DeFi and the impact of blockchain technology, which must be revised by future research. Further, we propose a trust paradox in the financial sector.
Initial coin offerings (ICOs) are one of the major innovations that characterize the digital revolution of financial markets. Among the expectations created by the digital revolution is the democratization of entrepreneurial finance, defined in terms of the creation of more equality regarding the access to financial resources by categories known to be underrepresented among potential entrepreneurs. Following this line of research, we investigate, through two complementary empirical studies, whether gender, ethnicity, and geography affect the choice of ICOs vs. traditional financing alternatives. Additionally, we assess whether these characteristics increase the amount of money an entrepreneur can raise. In Study I, we compare 390 ICO ventures to a sample of 1,078 VC-backed blockchain ventures, identifying a negative correlation between the choice of an ICO (vs. VC-backing) and a location in an urban area. In Study II, we compare 160 ICO ventures to 163 real estate investment trusts (REITs), reaffirming the results of Study I. The findings show significant participation and likelihood of successful campaigns for ethnical minorities in ICOs, with the latter also being able to collect, ceteris paribus, larger amounts of funding. In contrast, female entrepreneurs do not have higher chances to participate nor raise funds in ICOs.
Real estate industry is related to the national economy and people's livelihoodďźcharacterized by a high degree of financial intensity. The enterprises in this industry need certain financial ability and large shareholder controlling ability to support their survival. Howeverďźdue to the multiple adverse impacts of current state policiesďźbanks and private capitalďźthe credit crunchďźthe sudden decrease in withdrawn funds and the limitation of internal financingďźthe problem of capital restraint of real estate enterprises has become more and more serious. From the perspective of corporate governanceďźthis paper studies the interaction among financial constraintsďźownership concentration and corporate performance under different shareholding states by analyzing the quantitative characteristics of equity structureďźand looks for the appropriate range of the largest shareholder holding ratioďźwhich has considered the financial performance and risk. It is found that raising the ownership concentration can effectively ease the financing constraints and improve the performance of enterprisesďźboth of which are significant under the state of high ownership concentrationďź while the financial constraints play a significant intermediary effect under the State of absolute holdingďź while in the decentralized state of ownershipďźthere is a significant regulatory effectďźand the interaction of the three will be different due to the size of the enterprise.
Sulafa Badi, Edward G. Ochieng, Mohamed Nasaj, Maria Papadaki
This study aims to identify the factors that influence the adoption of smart contracts in the UK construction sector. A deductive questionnaire-based approach informed by the technology-organisation-environment (TOE) model is adopted. The framework is comprised of twelve independent variables and one dependent variable of smart contracts use intention. Ten hypotheses are developed to statistically test the causal relationships between the eleven variables of the research model. The study adopts a convenience sampling approach, with the population of interest being primarily drawn from among UK construction practitioners. The results generated from linear regression analysis suggest that the following four factors have a significant influence on the adoption of smart contracts: supply chain pressure, competitive pressure, top management support, and observability. The descriptive statistics obtained also offer a greater understanding of the perceptions and attitudes towards smart contracts across the UK construction sector. The results demonstrate the usefulness of a perception-based model that utilises the TOE framework to assess facets that influence the adoption of smart contracts. The study contributes to innovation diffusion studies in construction project management and supports âearly adoptersâ at the footfall of the technologyâs diffusion curve.
Abstract Research Summary How emotions impact firm valuation is empirically understudied because affective traits are difficult to quantify. However, using artificial emotional intelligence, positive and negative affects can be identified from facial muscle contractionârelaxation patterns obtained from public CEO photos during initial coin offerings, that is, blockchainâbased issuances of cryptocurrency tokens to raise growth capital. The results suggest that CEO affects impact firm valuation in two ways. First, CEOs' own firm valuations conform more to those of industry peers if negative affects are pronounced ( conformity mechanism ). Second, investors use CEO affects as signals about firm value and discount when negative affects are salient ( signaling mechanism ). Both mechanisms are stronger in the presence of asymmetric information. Managerial Summary The purpose of this paper is to advance our understanding of how CEOs' affective traits influence firm valuation by both, CEOs themselves and investors. The effect of CEO emotions is plausibly particularly pronounced for startâup firms, whose success prospects critically depend on their leaders. My results suggest that CEO emotions impact underpricing in initial coin offerings twofold. First, negative emotions are associated with CEOs choosing an underpricing level that closely conforms to their peer firms' average. Second, investors react to negative CEO emotions by demanding higher discounts on firm value. These effects are more pronounced when there is relatively little public information about the ICO firm. My paper is accompanied by artificial emotional intelligence software for implementation in practice and future research.
ABSTRACT: We study the ability of hedge funds to restructure target firms. A purchase of at least 3% of a target firmâs stake is subject to a 13D SEC Filing in the US. We use these filings to investigate the impact of such transactions in the period 2009â2020. Our method of choice is the event study approach. We set the event on the date of the transaction and compute cumulative abnormal returns (CARs) within a specified event window. Based on accounting metrics, such as return on equity and return on assets, we study how restructuring impacts target companyâs capital structure. Based on SEC Section 13G filings, we are further able to distinguish between acquisitions with active and passive aims. We find that firms targeted for active purposes achieve higher abnormal returns and overall higher performance. We further look on the impact of the overall stock-market cycle on abnormal returns. We find that the level of abnormal returns for actively targeted companies remains higher with no regard to the market cycle. Based on these findings, we draw conclusions on the overall impact of hedge fund activism. KEY WORDS: Hedge funds, Shareholder Activism, Abnormal Returns, Event study, Restructuring
Purpose This paper aims to examine how blockchain technology is disrupting business models for new venture finance. Design/methodology/approach The role of blockchain technology in the evolution of new business models to monetize the creative economy is explored by means of a case study approach. The focus is on the recorded music industry, which is in the vanguard of new forms of intermediation and financialization. There is a particular focus on emerging artists. Findings This paper provides novel case study insights and concludes by considering how further research can contribute to building a theory of technology-driven business models which apply to the development, on the one hand, of new forms of financial intermediaries, more correctly referred to as âinfomediaries,â and on the other hand, to new forms of direct monetization by artists. Originality/value This paper provides early insight into the emerging potential applications of blockchain technologies to streamline music industry business service models and improve finance streams for new artists. The findings have far-reaching implications across the creative sector.
There is disagreement in the literature concerning the impact of regulations on firmsâ development. While some researchers believe that regulation impedes companiesâ development (Poel et al., 2014; Jalilian et al., 2007), others argue that regulations enable companiesâ development (Peck et al., 2018; Mayson et al., 2014). This paper aims to contribute to a better understanding of the impact of financial regulations on development of Distributed Ledger Technology (DLT) firms. In-depth semi-structured open-ended interviews have been conducted with 20 Small Medium Enterprise (SME) DLT companies in Europe during April and May 2019. Our results show that the expected impact of financial regulation can be ambiguous as it can both enable and constrain a firmâs development. This is in line with Kitching et al. (2015) theory of regulation as a dynamic force.
An early stage funding platform using cryptocurrency smart contracts can potentially provide an equity and debt capital raising platform for new ventures compared to crowdfunding, initial coin offerings (ICOs) and seed funding. The existing capital raising methods are less transparent, have limited depth of funding and less diversification. Utilising a cryptocurrency smart contract-based early stage funding platform will allow new ventures to obtain a staged funding environment, starting from seed funding. Each stage of funding can be represented by a smart contract that is aligned to a formal standardised legally binding contract between the venture and investors through the platform. Competition for funds and a transparent smart contract-based platform should allow free markets to price investments in the new venture in a more efficient fashion. Additionally, such a platform should provide more funding opportunities to new ventures that weren't available prior.
The article focuses on whether it is possible to use new technologies such as distributed ledger technology (DLT) in shareholder ledger maintenance systems. The article uses Estonia as an example to describe the shortcomings of shareholder ledger maintenance regulation and possible suggestions for reform and applies the principle of technology-neutrality to the subject matter to assess whether the regulation allows the adoption of new technologies, such as DLT, in ledger maintenance. The aim of the principle of technology-neutrality is to secure that the regulator does not create regulation that prefers any particular technology and discriminates against other technologies. Any regulation that is built around a pre-existing technology could suffer from preferring the use of that particular technology and consequently hinder innovation. In the article it is examined whether the ledger maintenance models used in Estonia are benefitting or suffering from the non-existence of technology-neutral technical standards for ledger maintenance and whether the differentiation of treatment of shareholder ledger administrators is justified on the basis of the principle of technology-neutrality.
Raziyeh RezaâGharehbagh, Ashkan Hafezalkotob, Ahmad Makui, Mohammad Kazem Sayadi
Purpose This study aims to analyze the competition of two financial chains (FCs) when the government intervenes in the financial market to prohibit the excessively high-interest rate by minimizing the arbitrages caused by speculative transactions. Each FC comprises an investor and one intermediary, attempts to finance the capital-constrained firms in financing needs. Design/methodology/approach Using a Stackelberg game theoretic framework and formulating two- and three-level optimization problems for six possible scenarios, the authors establish an integrative framework to evaluate the scenarios through the lens of the two main decision-making structures of the FCs (i.e. centralized and decentralized) and three policies of the government (i.e. speculation minimizing, revenue gaining and utility maximizing). Findings Solving the problem results in optimal values for tariffs, which guarantee a stable competitive market. Consequently, policymaking by the government influences the decision variables, which is shown in a numerical study. The authors find that the government can orchestrate the FCs in the competitive market by imposing tariffs and prohibiting high-interest rates via regulating the speculation impacts, which guarantees a stable market and facilitates the financing of capital-constrained firms. Research limitations/implications This paper aids the financial markets and governments to control the interest rate by minimizing the speculation level. Originality/value This paper investigates the impact of government intervention policies â as a leading player â on the competition of FCs â as followers â in providing financial services and making profits. The government imposes tariffs on the interest rate to stabilize the market by limiting speculative transactions. The paper presents the mathematical models of the optimization problems through the game-theoretic framework and comparison of the scenarios through a numerical experiment.
Stephanie F. Cheng, Gus De Franco, Haibo Jiang, Pengkai Lin
This paper provides evidence on public firmsâ initial 8-K disclosures that mention Blockchain and investorsâ response to these disclosures. We categorize the description of Blockchain activities in firmsâ 8-Ks as Speculative (e.g., a vague future plan that involves Blockchain) or Existing (e.g., a description of Blockchain product). We document a sharp increase in the number of initial 8-K disclosures of Blockchain, particularly by Speculative firms, coinciding with the rise of Bitcoin prices and excitement in Blockchain technology in the last quarter of 2017. Investors react positively to the Blockchain 8-Ks issued by Speculative firms in the initial seven-day event window although the reaction is mostly reversed over the 30 days following the disclosure. The reaction is stronger when Bitcoin returns are more positive. Overall, our results are consistent with a situation that troubles the SEC and the financial press: investors overreact to a firmâs first 8-K disclosure of a potential foray into Blockchain technology and that overreaction is a function of the Bitcoin price bubble. This paper was accepted by Brian Bushee, accounting.
The article examines the rapidly developing area of blockchain finance as a potential opportunity for new creative ventures to obtain external investment funding and generate revenues. We focus on the music industry, as an example of how alternative Internet-based finance utilizing blockchain could provide opportunities for start-up funding and ongoing revenue streams. Our pioneering pilot research findings are drawn from literature review and emerging case studies, and are grounded in the academic literature of start-up funding gaps. Although some expect blockchain technology to remove intermediaries, facilitating a direct relationship between artist and fan, initial findings are that intermediation in some form will remain. The articleâs central focus is the crucial emerging role of these facilitator organizations â the new breed of financial intermediaries or âinfomediariesâ. We examine this evolving process through adoption and development of financial intermediation theory, exploring the wider financial intermediary concept of incubators and accelerators as expert investors and promoters of new and very early-stage ventures â including artists. The article poses the question of whether blockchain technology offers a new, more cooperative approach for creative ventures, or merely the reinvention of existing corporate structures, for instance, the three major record labels that currently dominate recorded music. The article identifies four possible paths for the adoption of blockchain technology within the music industry, ranging from the anarcho-libertarian to the corporate and from the âutopianâ to the âdystopianâ.
This paper provides the first evidence of a moral hazard in signaling in an entrepreneurial finance context, by examining token offerings or Initial Coin Offerings (ICOs). Entrepreneurs' ability to signal quality is crucial to succeeding in the competition for growth capital. However, the absence of institutions that verify endogenous signals may induce a moral hazard in signaling. Consistent with this hypothesis, artificial linguistic intelligence indicates that token issuers systematically exaggerate information disclosed in whitepapers. Exaggerating entrepreneurs raise more funds in less time, suggesting that investors do not see through this practice initially. Eventually, the crowd learns about the exaggeration bias through trading with other investors. The resulting investor disappointment causes the cryptocurrency to depreciate and the probability of platform failure to increase.