Decentralized Finance, Crypto Funds, and Value Creation in Tokenized Firms

Decentralized Finance (DeFi) employs blockchain technology and smart contracts with the goal of enabling perfectly disintermediated financial markets. Despite the far-reaching ambition, DeFi markets are experiencing increasing intermediation recently, as a new type of intermediary, so-called Crypto Funds (henceforth, CFs), reintroduces centralized market structures. In fact, the number of newly established active CFs has substantially grown over the last four years to more than 850 at the end of 2021, with a surge in total assets under management from $8.3 billion in mid-2018 to $57.5 billion in 2021. In a new article, we address the question of why CFs find … Read more

Financing Sustainable Entrepreneurship

At least since BlackRock boss Larry Fink’s annual letter to CEOs in 2019, investing in ESG assets has become a major topic among both retail and institutional investors. In a new article, we address the question of how economically attractive investments in ESG-oriented startups are.

Net capital inflows into sustainability-oriented firms and funds are soaring, and so are the valuations of ESG assets. Yet, the economics of sustainable investing are controversial among practitioners and academics. While many industry reports point to the high net capital inflows and favorable valuations of sustainable assets, financial economists warn that ESG-investing hype could be … Read more

The Economics of Crypto Funds

Crypto funds are a new financial intermediary that trade in cryptographically protected digital assets, known as coins or tokens. Both the number of crypto funds and investments in crypto funds are soaring. As of the second quarter of 2021, more than 800 crypto funds are active, and their aggregate assets under management exceed $60 billion. The trend is likely to continue, as crypto funds returned an average of 98 percent  (before fees) to their investors in the first quarter of 2021.

Crypto funds differ from more traditionally-managed funds in significant ways. For example, CryptoFundResearch reports that 43 percent of all … Read more

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

A vast literature studies the effects of antitakeover provisions (ATPs) on firm value. The academic consensus is that ATPs harm firm value because they partly insulate managers from the threat of takeover, and that view has become very influential. Prominent studies find that empire building through corporate acquisitions is the main channel of value destruction by entrenched managers (Masulis, Wang, and Xie, 2007; Harford, Humphery-Jenner, and Powell, 2012). Managers protected by ATPs are more likely to pursue self-interested deals that further increase their entrenchment, which harms shareholder value. A major limitation of the existing empirical studies  is their reliance on … Read more