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Investor reactions to crypto token regulation

Author

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  • Koenraadt, Jeroen
  • Leung, Edith

Abstract

Despite calls for regulation in the crypto utility token market, it is unclear how crypto tokeninvestors value current regulatory proposals. We find that on average, investors react negatively to news thatincreases the likelihood of securities and transparency-related regulation. We also find that this negativereaction is attenuated for tokens rated higher on quality and transparency by intermediaries, those thathave higher levels of disclosure, and listed on more liquid exchanges. The observed variation in tokentransparency and this muted reaction suggest investors perceive disclosure costs to be lower for tokens inmore transparent environments, suggesting that transparency matters to investors.

Suggested Citation

  • Koenraadt, Jeroen & Leung, Edith, 2022. "Investor reactions to crypto token regulation," LSE Research Online Documents on Economics 121614, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:121614
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    File URL: http://eprints.lse.ac.uk/121614/
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    References listed on IDEAS

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    1. Michael Greenstone & Paul Oyer & Annette Vissing-Jorgensen, 2006. "Mandated Disclosure, Stock Returns, and the 1964 Securities Acts Amendments," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(2), pages 399-460.
    2. Zhang, Ivy Xiying, 2007. "Economic consequences of the Sarbanes-Oxley Act of 2002," Journal of Accounting and Economics, Elsevier, vol. 44(1-2), pages 74-115, September.
    3. Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," The Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 3-40.
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    Cited by:

    1. Zhang, Pengcheng & Xu, Kunpeng & Qi, Jiayin, 2023. "The impact of regulation on cryptocurrency market volatility in the context of the COVID-19 pandemic — evidence from China," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 222-246.

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    More about this item

    Keywords

    regulation; transparency; cryptocurrencies; financial markets; crypto tokens;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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