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Article

Choice between IEO and ICO: Speed vs. Liquidity vs. Risk

Adam Smith Business School, College of Social Science, University of Glasgow, Glasgow G12 8QQ, UK
FinTech 2022, 1(3), 276-293; https://doi.org/10.3390/fintech1030021
Submission received: 2 August 2022 / Revised: 31 August 2022 / Accepted: 5 September 2022 / Published: 9 September 2022
(This article belongs to the Special Issue Recent Development in Fintech)

Abstract

This paper analyzes a financing problem for an innovative firm that is considering launching a web-based platform. The model developed in the paper is the first one that analyzes an entrepreneur’s choice between initial exchange offering (IEO) and initial coin offering (ICO). Compared to ICO, under IEO the firm is subject to screening by an exchange that reduces the risk of investment in tokens; also the firm receives access to a larger set of potential investors; finally tokens become listed on an exchange faster. The paper argues that IEO is a better option for the firm if: (1) the investment size is relatively large; (2) the extent of moral hazard problems faced by the firm is relatively large; (3) the degree of investors’ impatience is relatively small. Furthermore, a non-linear relationship between firm quality and its financing choice is found. Most of these predictions are new and have not been tested so far.
Keywords: risk in fintech; entrepreneurial finance; initial coin offering; initial exchange offering; moral hazard; utility tokens; listing risk in fintech; entrepreneurial finance; initial coin offering; initial exchange offering; moral hazard; utility tokens; listing

Share and Cite

MDPI and ACS Style

Miglo, A. Choice between IEO and ICO: Speed vs. Liquidity vs. Risk. FinTech 2022, 1, 276-293. https://doi.org/10.3390/fintech1030021

AMA Style

Miglo A. Choice between IEO and ICO: Speed vs. Liquidity vs. Risk. FinTech. 2022; 1(3):276-293. https://doi.org/10.3390/fintech1030021

Chicago/Turabian Style

Miglo, Anton. 2022. "Choice between IEO and ICO: Speed vs. Liquidity vs. Risk" FinTech 1, no. 3: 276-293. https://doi.org/10.3390/fintech1030021

APA Style

Miglo, A. (2022). Choice between IEO and ICO: Speed vs. Liquidity vs. Risk. FinTech, 1(3), 276-293. https://doi.org/10.3390/fintech1030021

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