The Role of the Information Environment in Entrepreneurial Fundraising
Abstract
Entrepreneurial finance research has often overlooked the fact that the effects of quality signals vary across different information environments. Indeed, in a noisy signaling environment, the potential of quality signals to resolve information asymmetries may dissipate. In this study we inspect the direct and indirect effects of signaling environment on the fundraising success of Initial Coin Offerings (ICOs). We postulate that two dimensions of signaling environment, i.e., information richness and information variation, may result in less favorable funding outcomes for ICOs because these dimensions would increase search costs for investors and result in information overload. Moreover, these dimensions also may create a noisy signaling environment, weakening the positive effects of specific quality signals. A unique sample of 1,104 ICO projects provides support for our hypotheses.
