Hitting the right note: the impact of lexical complexity on initial coin offering success

Abstract:This paper introduces a novel approach to financial textual analysis, focusing on lexical complexity as an informative metric beyond traditional readability measures. Analyzing 1,202 ICO white papers from 2015 to 2021, we find that higher lexical complexity, measured by vocabulary sophistication, density, and diversity, positively influences the amount raised during ICOs. This effect is amplified for more readable white papers and ICOs from countries with lower literacy rates. We also identify potential mechanisms driving these results, linking lexical complexity to increased perceptions of innovation, quality, and reduced information asymmetry. Our findings contribute to entrepreneurial finance literature by demonstrating that the choice of vocabulary significantly enhances the informativeness of financial disclosures, beyond conventional readability metrics.

Publication year:2024

Keywords:Economics

Accessibility:Open