Positive tone and initial coin offering

Abstract

An initial coin offering (ICO) has become a popular venue for crowdfunding at an early stage in a blockchain project. In the ICO process, a whitepaper may serve as an effective marketing tool to influence investor perception and investor trading behaviour. In this paper, we investigate whether management sentiment, as captured by the disclosure tone of the ICO whitepaper, is seen as a credible signal and capable of affecting price behaviour of the ICO on its first trading day. We document a positive association between management’s net positive tone in the whitepaper and ICO first‐day return, indicating that management sentiment has a significant impact on investor behaviour. Our findings show, however, that such association is contingent on the presence of causal argument, suggesting that disclosure tone needs a significant extent of causal reasoning support to back up its credibility and make it persuasive. These findings provide incremental evidence on the relationship between management tone and relative asset returns during an ICO process in the cryptocurrency markets. While management may benefit from soft information disclosure in the whitepaper, investors and regulators should be aware of self‐serving incentives in whitepaper disclosures.

Blockchain auditing dilemma: Exploring hesitation among audit firms

“…Concerns were raised about whether Tether (Stablecoin) was genuinely backed by US dollar reserves, as claimed by them. Comprehensive audits are needed by the community to verify these assertions, reflecting the critical role of auditing in ensuring public trust in decentralized systems (Nejadmalayeri, 2022;Zhang, 2021).…”

Managerial tone and investors' hedging activities: Evidence from credit default swaps

“…Loughran and McDonald (2011) first compile a financial tone dictionary constructed by using words that appear frequently in SEC filings (L&M word lists), and they further validate that such a dictionary can capture the positive and negative tone in business environments. As such, like many recent researchers (Chen et al, 2019; D'Augusta & DeAngelis, 2020a, 2020b; Huang, Teoh, & Zhang, 2014; Loughran & McDonald, 2011; Zhang et al, 2022), we use the well‐established L&M word lists to identify the respective numbers of positive and negative words appearing in the MD&A section of the 10‐K/Q filings. Concretely, consistent with the measurement in previous studies, such as Rogers et al (2011) and Feldman et al (2010), our managerial tone ( TONE ) is defined as the difference between the number of positive and negative words in the MD&A scaled by the word count of the MD&A document and multiplied by 100, formulated as follows:$$$$ TONE={\frac{N\_ POSITIVE-N\_ NEGATIVE}{LENGTH}}^{\ast }100= POSITIVE- NEGATIVE.$$…”

Investor attention and the predictability of the volatility of CNY‐CNH spreads: Evidence from a GARCH‐MIDAS model

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