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Initial Coin Offerings: can ESG mitigate Underpricing?

Author

Listed:
  • Alessandro Bitetto

    (University of Pavia)

  • Paola Cerchiello

    (University of Pavia)

Abstract

Initial Coin Offerings (ICOs) have emerged as a novel way of start-up funding based on blockchain technology and this paper aims to explain the nexus between ICOs business purposes and underpricing, i.e. when the price of the offered token is lower than the one traded on the market. In particular, we focus on the impact of the Environmental, Social and Governance (ESG) pillars on the ICOs' underpricing. Therefore, we built up a wide and comprehensive dataset comprising $\sim8000$ ICOs spanning from 2015 through 2023, containing both technical and financial information. Moreover, we assessed an ESG score using AI-based textual analysis performed over the whitepapers. The main results show that a higher ESG orientation leads to less underpricing, especially in the early trading days. Our findings may represent a useful support to an enhanced and reliable decision-making process.

Suggested Citation

  • Alessandro Bitetto & Paola Cerchiello, 2024. "Initial Coin Offerings: can ESG mitigate Underpricing?," DEM Working Papers Series 221, University of Pavia, Department of Economics and Management.
    • Handle: RePEc:pav:demwpp:demwp0221
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    File URL: https://economiaemanagement.dip.unipv.it/sites/dip10/files/2024-07/DEMWP0221.pdf
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    References listed on IDEAS

    as
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    Keywords

    Initial coin offering (ICO); ESG; Text analysis; Underpricing.;
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