【 Webinar Series - Innovation, Productivity, and Challenges in the Digital Era: Asia and Beyond 】

Blockchain without Crypto? Linking On-Chain Data Growth to Firm Fundamentals and Stock Returns

Date: 6 Apr 2022 (Wed)
Time: 10:00 am – 11:10 am (Hong Kong Time, UTC+8)

Abstract:

Despite the explosive growth of cryptocurrencies and decentralized finance, whether the underlying technology adds significant value and will thus sustain broad adoption remains unclear. Using proprietary data on firm-level blockchain records from 2015 to 2021, the authors conduct the first large-sample study linking blockchains to firm fundamentals and asset valuation in a country where cryptocurrencies are completely banned. The authors find that year-on-year quarterly blockchain data growth (BDG) contains value-relevant information for nowcasting and forecasting assets growth, sales growth, ROA, standardized unexpected earnings (SUE), and innovation outcomes measured through patents. BDG also predicts stock returns, especially around future earnings announcements, with a long-short BDG-sorted portfolio generating a 10.56% risk-adjusted return annually. The findings are robust across industries and regions, superior compared to other nowcasters, and hold in international samples. The authors further discuss the underlying economic channels (e.g., continuous disclosure and reduction in information asymmetry) and provide evidence for causality which are consistent with real-life use cases and heterogeneity analyses that reveal firms with greater information asymmetry, lower disclosure quality, and less public trust benefit more from blockchain adoption and on-chain data growth.

Speaker:

Lin William CONG, Rudd Family Professor of Management and Associate Professor of Finance, Samuel Curtis Johnson Graduate School of Management, SC Johnson College of Business, Cornell University

Co-author:
Ran CHANG, Assistant Professor of Finance, Antai College of Economics and Management, Shanghai Jiao Tong University

Discussant:
Greg BUCHAK, Assistant Professor of Finance, Stanford Graduate School of Business, Stanford University

Session Chair:

Bernard YEUNG
Stephen Riady Distinguished Professor in Finance and Strategic Management, NUS Business School, National University of Singapore and President of ABFER

About the Webinar

Artificial Intelligence (AI), Big Data, multilevel neural nets, the Internet of Things (IoT) and other digital technologies are transforming the world. They are strengthening innovation and productivity and innovation by rendering the future more predictable and reshaping individual, business, social, and government behavior. Asia leads the world in some of these endeavors, e.g., digital platforms. The OECD lists 40% of big new digital technologies as Asian. Almost half of global digital platform business-to-consumer revenues are Asian, versus only 22% from the U.S. and 12% from the Eurozone. Profound new policy challenges arising, in consequence, include: shifting skills demanded in labor markets and “digital divide” inequality, (ii) AI expanding financial inclusion or encoding inequality, expanding or obscuring accountability, increasing transparency or obscuring amoral decision-making, and (iii) digital privacy, unsanctionable on-line libel, misinformation, manipulation, and propaganda. The ABFER, therefore, plans a monthly e-seminar series spotlighting important new research, particularly the Asia-pacific related, into these issues and providing “state-of-the-art” overviews by prominent scholars. We hope policy makers and practitioners will find the e-seminars helpful and will alert researchers to issues needing attention.

Collaborating Organizers

ABFER, CUHK-Zhejiang University Joint Research Center for Digital Economy, The Chinese University of Hong Kong (CUHK) Department of Economics, Center for Internet Development and Governance, Tsinghua University School of Economics and Management (Tsinghua SEM)