The Wisdom of Crowds in FinTech: Evidence from Initial Coin Offerings

75 Pages Posted: 21 Jun 2018 Last revised: 9 Jan 2021

See all articles by Jongsub Lee

Jongsub Lee

Seoul National University; University of Florida - Warrington College of Business Administration

Tao Li

University of Florida - Department of Finance, Insurance and Real Estate

Donghwa Shin

University of North Carolina at Chapel Hill, Kenan-Flagler Business School

Date Written: January 5, 2021

Abstract

Certification by online analysts on a FinTech platform that harnesses the "wisdom of crowds" is associated with successful initial coin offerings (ICOs). Using novel data on ICO analysts' backgrounds, we show that more favorable ratings by analysts with proper expertise significantly predict fundraising success. Analyst ratings also help detect potential fraud ex ante. We document that analysts are incentivized to issue informative ratings to advance their careers in future ICOs. Analyst ratings positively predict long-run token returns and negatively predict return volatility. Overall, our results suggest that a market-based certification process that builds on the expertise and incentives of analysts is at play in financing blockchain startups.

Keywords: Crowdsourcing, Wisdom of Crowds, ICO, Blockchain, FinTech, Analyst expertise, Analyst incentives

JEL Classification: L26, G14, D81, D82, D83, G12

Suggested Citation

Lee, Jongsub and Li, Tao and Shin, Donghwa, The Wisdom of Crowds in FinTech: Evidence from Initial Coin Offerings (January 5, 2021). Available at SSRN: https://ssrn.com/abstract=3195877 or http://dx.doi.org/10.2139/ssrn.3195877

Jongsub Lee

Seoul National University ( email )

Kwanak-gu
Seoul, 151-742
Korea, Republic of (South Korea)

University of Florida - Warrington College of Business Administration ( email )

Department of Finance Insurance & Real Estate
P.O. Box 117168
Gainesville, FL 32611-7168
United States
352-273-4966 (Phone)
352-392-0301 (Fax)

Tao Li (Contact Author)

University of Florida - Department of Finance, Insurance and Real Estate ( email )

Warrington College of Business
Gainesville, FL 32611
United States

HOME PAGE: http://warrington.ufl.edu/contact/profile.asp?WEBID=7628

Donghwa Shin

University of North Carolina at Chapel Hill, Kenan-Flagler Business School ( email )

300 Kenan Center Drive
Chapel Hill, NC 27599
United States
6096137699 (Phone)

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