Publications

Cybercrime on the Ethereum Blockchain

Journal of Banking & Finance, 2025 (with L. Hornuf, R. Nam, Y. Yuan)

→ Coverage: Decrypt, CoinTribune, Duke Law School
→ Best Paper Awards: PDW for Financial Market Misconduct SI in the Journal of Banking and Finance, British Academy of Management, IHS at George Mason University

Abstract: We examine how cybercrime impacts victims’ risk-taking and returns. Our difference-in-differences analysis of a sample of victims and matched non-victims is in line with prospect theory and suggests that victims increase their long-term total risk-taking after losing part of their wealth. Victims also earn lower risk-adjusted returns in the post-cybercrime period. Victims’ long-term total risk-taking increases because they increase diversifiable risk in the long term. The increased diversifiable risk correlates with victims’ withdrawal from altcoins after cybercrime. At the same time, the reduction in risk-adjusted returns correlates with increased trading activity and churn, due plausibly to managing cybercrime exposure. In the cross-section of Ethereum addresses, we show that the most affluent victims take a systematic approach to restore their pre-cybercrime wealth level, while the least affluent victims turn into gamblers. Finally, a parsimonious forensic model explains a good part of the addresses’ probability of being involved in cybercrime, on both the victim and the cybercriminal side. [working paper version here]

Distributed Governance and Value Creation in Decentralized Autonomous Organizations: Evidence from a Regression Discontinuity Design

Economics Letters, 2025 (with V. Lo Monaco and S. Vismara)

Abstract: Distributed governance mechanisms increase tokenholder value in decentralized autonomous organizations (DAOs) when decision-making is contested. Using a comprehensive dataset of proposals voted on within blockchain-based DAOs from 2020 to 2024, we exploit a regression discontinuity design on proposals that pass or fail by a close margin around the majority threshold. Local average treatment effects indicate that proposal passage increases DAO token returns by 4.7% at the margin. Further, a one standard deviation increase in vote participation amplifies this effect by 2.2%. Proxies for democratization and decentralization also increase the value-creating effect of contested decision-making in DAOs. Our findings contribute to understanding how distributed governance structures create value in digital organizations. [working paper version here]

Financing Decentralized Digital Platform Growth: The Role of Crypto Funds in Blockchain-based Startups

Journal of Business Venturing, 2025 (with D. Cumming, W. Drobetz, N. Schermann)

→ Coverage: Duke Law School FinReg Blog, Columbia Law School BlueSky Blog

Abstract: Coordination frictions prevent the efficient adoption and governance of blockchain-based platforms. Crypto funds (CFs) create value by smoothing frictions on decentralized digital platforms (DDPs). CF-backed DDPs obtain higher valuations in the primary token market, outperform their peers after issuing tokens, and benefit from token price appreciation around CF investment disclosure in the secondary market. Primary transaction data from the Ethereum ledger shows that the valuations of DDPs with meager adoption and a higher centralization of token ownership benefit more from CF backing. The positive valuation and performance effects for CF-backed DDPs are more pronounced for CFs that are more central in investor networks. [working paper version here]

Token-Based Crowdfunding: Investor Choice and the Optimal Timing of Initial Coin Offerings

Entrepreneurship Theory and Practice, 2025 (with W. Drobetz, L. Hornuf, N. Schermann)

→ Coverage: Oxford Business Law Blog

Abstract: What role does the selection of an investor and the timing of financing play in initial coin offerings (ICOs)? We investigate the operating and financial performance of ventures conducting ICOs with different types of investors at different points in the venture life cycle. We find that, relative to purely crowdfunded ICO ventures, institutional investor-backed ICO ventures exhibit poorer operating performance and fail earlier. However, conditional on their survival, these ventures financially outperform those that do not receive institutional investor support. The diverging effects of investor backing on financial and operating performance are consistent with our theory of certification arbitrage; i.e., institutional investors use their reputation to drive up valuations and quickly exit the venture post-ICO. Our findings further indicate that there is an inverted U-shaped relationship for fundraising success of ICO ventures over their life cycle. Another inverted U-shaped relationship exists for the short-term financial performance of ICO ventures over their life cycle. Both the fundraising success and the financial performance of an ICO venture initially increase over the life cycle and eventually decrease after the product piloting stage. [working paper version here]

Voting Governance and Value Creation in Decentralized Autonomous Organizations (DAOs)

Journal of Business Venturing Insights, 2025 (with C. Bellavitis)

Abstract: Decentralized autonomous organizations (DAOs) crowdfunds to invest in various projects. The decentralization feature of DAOs submits that decision-making is a collective democratic action of all DAO members. The autonomy feature of DAOs suggests that decision-making is an algorithmic process governed by self-executing smart contracts. However, in reality, DAOs are neither perfectly decentralized nor completely autonomous. Our empirical analysis shows that deviations from the ideals of decentralization and autonomy are costly. Non-algorithmic off-chain voting governance of decision-making leads to a substantial discount in DAO value. Non-decentralized aspects such as large voting coalitions also affect DAO value. Interaction effects are also shown. The study implies that platform governance design choices are crucial for DAO success. [working paper version here]

Entrepreneurial Finance and Sustainability: Do Institutional Investors Impact the ESG Performance of SMEs?

Journal of Business Venturing Insights, 2024 (with W. Drobetz, S. El Ghoul, O. Guedhami, J. Hackmann)

Abstract: Institutional investors improve the environmental, social, and governance (ESG) performance of small- and medium-sized enterprises (SMEs). Our difference-in-differences framework shows that the backing from private equity and venture capital funds leads to an increase in SMEs’ externally validated ESG scores compared to their matched non-investor-backed peers. Consistent with “ESG-as-insurance” theory, the ESG performance of SMEs with a higher probability of failure is more likely to benefit from the backing of institutional investors. This positive effect is heterogeneous; while SMEs with high ex-ante ESG performance tend to further improve their ESG performance following institutional investor backing, SMEs with low ex-ante ESG performance are unlikely to implement any improvements. Entrepreneurial finance seems to help sustainable entrepreneurs to develop into “sustainability champions,” while neglecting the betterment of non-sustainable SMEs. [working paper version here]

Is Sustainable Entrepreneurship Profitable? ESG Disclosure and the Financial Performance of SMEs

Small Business Economics, 2024 (with I. Parra Oller)

Abstract: Sustainability practices have a positive effect on the financial performance of SMEs. We extract ESG-related information for a sample of Spanish SMEs over the period 2012-2022 using tools provided by the Internet Archive to estimate a staggered difference-in-differences model of how the release of new ESG-related information impacts the financial performance of SMEs. ESG-related information can be delivered as an endogenous signal or as an exogenous certification. We show that both types of ESG-related information have a positive effect on SME financial performance, and that both are informational substitutes. We also show that institutional change in the form of the 2015 Paris Agreement on Climate Change moderated the sustainability-performance relation. Specifically, post-Paris, the value-creating impact of exogenous ESG certification increased, while endogenous ESG signals without external certification became ineffective or detrimental. Finally, in line with CSR-as-insurance theory, we show that SMEs with higher performance variability benefit more from sustainability orientation. [working paper version here]

Academic Freedom and Innovation

PLOS ONE, 2024 (with D. Audretsch, C. Fisch, C. Franzoni, S. Vismara)

→ Coverage: European Union, European Parliament, LSE Impact Blog, Academe Blog, Research Europe, ProMarket, George J. Stigler Center for the Study of the Economy and the State, University of Chicago

Abstract: Academic freedom is a critical norm of science. Despite the widely postulated importance of academic freedom, the literature attests to a dearth of research on the topic. Specifically, we know little about how academic freedom relates to indicators of societal progress, such as innovation. We address this research gap by empirically assessing the impact of academic freedom on the quantity (patent applications) and quality (patent citations) of innovation output using a comprehensive sample of 157 countries over the 1900–2015 period. We find that improving academic freedom by one standard deviation increases patent applications by 41% and forward citations by 29%. The results are robust across a range of different specifications. Our findings constitute an alarming plea to policymakers: global academic freedom has declined over the past decade for the first time in the last century and our estimates suggest that this decline poses a substantial threat to the innovation output of countries in terms of both quantity and quality. [working paper version here]

Decentralized Finance (DeFi) Markets for Startups: Search Frictions, Intermediation, and the Efficiency of the ICO Market

Small Business Economics, 2024

Abstract: This paper examines the efficiency of the Initial Coin Offering (ICO) market through a search-theoretical lens. Search intensity associated with the process of identifying valuable startups is increasing in market granularity. Blockchain technology increases market granularity because asset tokenization lowers entry barriers. Lower-end entrants, however, increase aggregate search intensity but may lack search skills. The resulting search-related inefficiency creates a niche for intermediaries or institutional investors that specialize on search. Consistent with the theory, specialized crypto funds increase ICO market efficiency by reducing search frictions, inter alia, by shortening the time-to-funding and increasing the funding amount. At the same time, crypto funds extract sizable economic rents for their intermediation services. Overall, the study relates to the general trade-off between centralization and decentralization in entrepreneurial finance. It suggests that market frictions specific to early-stage crowdfunding of entrepreneurship may prevent perfectly Decentralized Finance (DeFi) markets from functioning efficiently. [working paper version here]

Performance Measurement of Crypto Funds

Economics Letters, 2023 (with N. Dombrowski, W. Drobetz)

Abstract: Crypto funds (CFs) are a growing intermediary in cryptocurrency markets. We evaluate CF performance using metrics based on alphas, value at risk, lower partial moments, and maximum drawdown. The performance of actively managed CFs is heterogenous: While the average fund in our sample does not outperform the overall cryptocurrency market, there seem to be some few funds with superior skills. Given the non-normal nature of fund returns, the choice of the performance measure affects the rank orders of funds. Compared to the Sharpe ratio, the most commonly applied metric in practice, performance measures based on alphas and maximum drawdown lead to diverging fund rankings. Depending on their ranking of preferences, CF investors should thus consider a bundle of metrics for fund selection and performance measurement. [working paper version here]

Financing Sustainable Entrepreneurship: ESG Measurement, Valuation, and Performance

Journal of Business Venturing, 2022 (with S. Mansouri)

→ WAIFC 2022 Best Paper Award
→ EBS Best Paper Award 2023
→ Academy of Management 2023 Best Paper Award on Sustainable Entrepreneurship sponsord by the Ewing Marion Kauffman Foundation

Abstract: Sustainability orientation has a positive effect on startups’ initial valuation and a negative effect on their post-funding financial performance. All else equal, improving sustainability orientation by one standard deviation increases startups’ funding amount by 28% and decreases investors’ abnormal returns per post-funding year by 16%. The results hold in a large sample of blockchain-based crowdfunding campaigns, also known as Initial Coin Offerings (ICOs) or token offerings. A key contribution is our a machine-learning approach to assess startups’ Environment, Society and Governance (ESG) properties from textual data, which we make readily available at www.SustainableEntrepreneurship.org. [working paper version here]

The CEO Beauty Premium

Strategic Entrepreneurship Journal, 2022 (with M. G. Colombo, C. Fisch, S. Vismara)

→ Most Cited Paper Award at Strategic Entrepreneurship Journal 2024
→ SEJ/Wiley 2022 top cited paper award

Abstract: How do top executives’ physical attributes impact firm value? Our study combines Upper Echelons Theory (UET) with insights from social psychology and labor economics to investigate how Chief Executive Officers’ (CEOs’) facial attractiveness influences firm valuation by investors in Initial Coin Offerings (ICOs). We document a pronounced CEO beauty premium. The positive relationship between CEO attractiveness and firm valuation is not driven by stereotype-based evaluations; that is, investors do not mistake attractiveness for other latent traits, such as competence, intelligence, likeability, or trustworthiness. Rather, CEO attractiveness seems to bear economic value per se. It helps attract institutional investors and has a sustainable effect on token price performance. Our results are immune to recall and confirmation biases, reverse causality, and unobserved heterogeneity. [working paper version here]

The Economics of Law Enforcement: Quasi-Experimental Evidence from Corporate Takeover Law

Journal of Corporate Finance, 2021 (with G. Dissanaike, W. Drobetz, J. Rocholl)

→ Lead Article
→ Nominated for best paper award (Financial Management Association)

Abstract: This paper examines the impact of takeover law enforcement on corporate acquisitions. We use the European Takeover Directive as a natural experiment, which harmonizes takeover law across countries, while leaving its enforcement to the discretion of individual countries. We exploit this heterogeneity in enforcement quality across countries in a difference-in-differences-in-differences model, while employing an overall inductive research approach, following the recommendation in Karpoff and Whittry (2018). We find that acquirer returns increase in countries with changes in takeover law, driven by improved target selection and lower cost of financing. The increase in acquirer returns is lower in weak enforcement jurisdictions, which we identify by developing a novel Takeover Law Enforcement Index (TLEI). The findings show that takeover law can mitigate agency conflicts, but its true value depends on its enforcement. Our results are robust to a number of robustness tests. [working paper version here]

CEO Emotions and Firm Valuation in Initial Coin Offerings: An Artificial Emotional Intelligence Approach

Strategic Management Journal, 2021

Abstract: CEO emotions are difficult to measure and hence empirically understudied. However, using artificial emotional intelligence, positive and negative affects can be identified from facial muscle contraction-relaxation patterns obtained from public CEO photos during initial coin offerings (ICOs), i.e., blockchain-based issuances of cryptocurrency tokens to raise growth capital. The results suggest that CEO affects impact firm valuation in two ways. First, CEOs’ own firm valuations conform more to those of industry peers if negative affects are pronounced (conformity mechanism). Second, investors use CEO affects as signals about firm value and discount when negative affects are salient (signaling mechanism). Negative affects can reduce firm value by up to 15%. Both mechanisms are stronger in the presence of asymmetric information. [working paper version here]

Entrepreneurial Finance and Moral Hazard: Evidence from Token Offerings

Journal of Business Venturing, 2021

→ Coverage: The Economist

Abstract: This paper provides the first evidence of a moral hazard in signaling in an entrepreneurial finance context, by examining token offerings or Initial Coin Offerings (ICOs). Entrepreneurs ability to signal quality is crucial to succeeding in the competition for growth capital. However, the absence of institutions that verify endogenous signals may induce a moral hazard in signaling. Consistent with this hypothesis, artificial linguistic intelligence indicates that token issuers systematically exaggerate information disclosed in whitepapers. Exaggerating entrepreneurs raise more funds in less time, suggesting that investors do not see through this practice initially. Eventually, the crowd learns about the exaggeration bias through trading with other investors. The resulting investor disappointment causes the cryptocurrency to depreciate and the probability of platform failure to increase. [working paper version here]

Institutional Investors and Post-ICO Performance: An Empirical Analysis of Investor Returns in Initial Coin Offerings (ICOs)

Journal of Corporate Finance, 2020 (with C. Fisch)

Abstract: We examine the role of institutional investors in Initial Coin Offerings (ICOs). Taking a financial investor’s perspective, we assess the determinants of post-ICO performance via buy-and-hold abnormal returns in a sample of 565 ICO ventures. Conceptually, we argue that institutional investors’ superior screening (selection effect) and coaching abilities (treatment effect) enable them to partly overcome the information asymmetry of the ICO context and extract informational rents from their ICO investments. We find that institutional investor backing is indeed associated with higher post-ICO performance. Disentangling the selection and treatment effects econometrically, we find that both of these effects explain the positive impact on post-ICO per-formance. Overall, our results highlight the importance of institutional investors in the ICO context. [working paper version here]

Antitakeover Provisions and Firm Value: New Evidence from the M&A Market

Journal of Corporate Finance, 2020 (with W. Drobetz)

Abstract: New evidence from acquisition decisions suggests that antitakeover provisions (ATPs) may increase firm value when internal corporate governance is sufficiently strong. We document that, in Germany, firms with stronger ATPs, and particularly supermajority provisions, are better acquirers. Managers of high-ATP firms create value in acquisitions by making governance-improving deals. They are more likely to engage in acquisitions that reduce their own entrenchment level and less likely to invest in declining industries. Further, our empirical evidence is consistent with a short-termist interpretation. We show that takeover threats can induce myopic investment decisions, which ATPs can mitigate. They also lead managers to engage more often in value-creating long-term and innovative investing, and increase their sensitivity to investment opportunities. Our findings contribute to a growing literature challenging conventional wisdom that the agency-increasing effect of ATPs empirically dominates the myopia-eliminating effect, suggesting that a more contextual view of the value implications of ATPs is necessary. [working paper version here]

Competition Policy and the Profitability of Corporate Acquisitions

Journal of Corporate Finance, 2020 (with G. Dissanaike and W. Drobetz)

→ Nominated for best paper award (Financial Management Association)

Abstract: Merger control exists to help safeguard effective competition. However, findings from a natural experiment suggest that regulatory merger control reduces the profitability of corporate acquisitions. Uncertainty about merger control decisions reduces takeover threats from foreign and very large acquirers, therefore facilitating agency-motivated deals. Valuation effects are more pronounced in countries with stronger law enforcement and in more concentrated industries. Our results suggest that competition policy may impede the efficiency of the M&A market. [working paper version here]

Initial Coin Offerings

PLOS ONE, 2020

→ Coverage: European Parliament

Abstract: This paper examines the market for initial coin offerings (ICOs). ICOs are smart contracts based on blockchain technology that are designed for entrepreneurs to raise external finance by issuing tokens without an intermediary. Unlike existing mechanisms for early-stage finance, tokens potentially provide investors with rapid exit opportunities thanks to liquid trading platforms. The marketability of tokens offers novel insights into entrepreneurial finance, which I explore in this paper. First, I document that investors earn on average 8.2% on the first day of trading. However, about 40% of all ICOs destroy investor value on the first day of trading. Second, I explore the determinants of market outcomes and find that management quality and the ICO profile are positively correlated with the funding amount and returns, whereas highly visionary projects have a negative effect. Among the 21% of all tokens that get delisted from a major exchange platform, highly visionary projects are more likely to fail, which investors anticipate. Third, I explore the sensitivity of the ICO market to adverse industry events such as China’s ban of ICOs, the hack of leading ledgers, and the marketing ban on FaceBook. I find that the ICO market is highly susceptible to such environmental shocks, resulting in substantial welfare losses for investors. [working paper version here]