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Unpacking the black box of ICO white papers: A topic modeling approach

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  • Thewissen, James
  • Shrestha, Prabal
  • Torsin, Wouter
  • Pastwa, Anna M.

Abstract

We apply a novel topic modeling method to map Initial Coin Offerings’ (ICOs’) white paper thematic content to analyze its information value to investors. Using a sentence-based topic modeling algorithm, we determine and empirically quantify 30 topics in an extensive collection of 5,210 ICO white papers between 2015 and 2021. We find that the algorithm produces a semantically meaningful set of topics, which significantly improves the model performance in identifying successful projects. The most value-relevant topics concern the technical features of the ICO. However, we find that white paper's informativeness substantially diminishes after the token is listed. Moreover, we show that credibility-enhancing mechanisms (i.e., regulations and ICO analysts) reinforce the information value of ICO white papers. Overall, our results suggest that the topics discussed in white papers and the attention devoted to each topic are useful ICO performance indicators.

Suggested Citation

  • Thewissen, James & Shrestha, Prabal & Torsin, Wouter & Pastwa, Anna M., 2022. "Unpacking the black box of ICO white papers: A topic modeling approach," Journal of Corporate Finance, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:corfin:v:75:y:2022:i:c:s0929119922000682
    DOI: 10.1016/j.jcorpfin.2022.102225
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    Cited by:

    1. Shih‐Chu Chou & Zhe‐An Li & Tawei Wang & Ju‐Chun Yen, 2023. "How the quality of initial coin offering white papers influences fundraising: Using security token offerings white papers as a benchmark," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 30(1), pages 3-18, January.
    2. Muneer M. Alshater & Mayank Joshipura & Rim El Khoury & Nohade Nasrallah, 2023. "Initial Coin Offerings: a Hybrid Empirical Review," Small Business Economics, Springer, vol. 61(3), pages 891-908, October.
    3. Xia, Feilian & Thewissen, James & Shrestha, Prabal & Yan, Shuo, 2024. "The power of a name: Exploring the relationship between ICO name fluency and investor decision making," International Review of Financial Analysis, Elsevier, vol. 93(C).
    4. Feilian Xia & James Thewissen & Winifred Huang & Shuo Yan, 2024. "Founder-CEO Extraversion and Sustainability Orientation in Initial Coin Offerings," Entrepreneurship Theory and Practice, , vol. 48(4), pages 941-980, July.
    5. Carolina Camassa, 2023. "Legal NLP Meets MiCAR: Advancing the Analysis of Crypto White Papers," Papers 2310.10333, arXiv.org, revised Oct 2023.

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    More about this item

    Keywords

    ICOs; White paper informativeness; Topic modeling; ICO regulation; ICO analysts;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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