Effects of initial coin offering characteristics on cross-listing returns

Abstract

The low level of regulation and publication requirements in cryptocurrency markets leads to little information on cryptocurrency projects being publicly available. Against the background of high information asymmetry, the interpretation of the available information is all the more important. This paper examines how initial coin offering (ICO) characteristics affect cross-listing returns, i.e. whether or not available information is a valuable market signal of quality. For this purpose, we analyze 250 cross-listings of 135 different tokens issued via ICOs and calculate abnormal returns for specific samples using event study methodology. We find that cross-listing returns are driven by success in terms of token performance and project funding, as well as by jurisdiction-specific characteristics like the extent of regulation and domestic market size. Other characteristics such as the choice or change of blockchain infrastructure, token distribution across investors and the project team, campaign duration and whitepaper characteristics also seem to influence perceived project quality and thus cross-listing returns. The results contribute to the literature on cross-listings, cryptocurrency markets and entrepreneurial finance in the form of ICOs. They also make it possible to interpret the information available on the market and enable investors, project teams and cryptocurrency exchanges to evaluate probable market reactions to cross-listings.