BIS Working Papers No 1162 Regulation, information asymmetries and the funding of new ventures by Matteo Aquilina, Giulio Cornelli and Marina Sanchez del Villar Monetary and Economic Department January 2024 JEL classification: D82, G24, G28, O16. Keywords: corporate finance, venture capital, asymmetric information, cryptocurrency. BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS. This publication is available on the BIS website (www.bis.org). © Bank for International Settlements 2024. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISSN 1020-0959 (print) ISSN 1682-7678 (online) Regulation, information asymmetries and thefunding of new ventures∗Matteo AquilinaGiulio CornelliMarina Sanchez del VillarJanuary 2024AbstractCan regulation ease problems of asymmetric information for young and innovativefirms? The new and largely unregulated cryptocurrency ecosystem offers a uniquesetting to test this hypothesis. We construct a comprehensive measure of regulatorystringency at the state-month level for the United States and find that morestringent regulation is conducive to more private capital, but only in states with amore developed financial sector. Looking at granular deal-level data we trace theincrease in access to capital triggered by a more stringent regulatory environmentto a reduction in information asymmetries.Consistently with a reduction ininformation asymmetry, we find that younger firms with less tangible assets benefitmore, and foreign investors, investors that are not specialised in the crypto sectorand those with fewer investment professionals invest more capital.JEL Classification: D82, G24, G28, O16Keywords: corporate finance, venture capital, asymmetric information,cryptocurrency∗Matteo Aquilina (matteo.aquilina@bis.org) is at the Bank for International Settlements, GiulioCornelli (giulio.cornelli@bis.org) is at the Bank for International Settlements and the University ofZurich and Marina Sanchez del Villar (marina.sanchez@eui.eu) is at the European University Institute.We thank Douglas Araujo, Ryan Banerjee, Fabio Bertolotti, Thomas Crossley, Sebastian Doerr,Leonardo Gambacorta, Enisse Kharroubi, Ulf Lewrick, Steven Ongena, Andreas Schrimpf, Sonya Zhuand an anonymous referee for their useful comments and suggestions. The views expressed in this paperare those of the authors and do not necessarily reflect those of the Bank for International Settlements,European University Institute or University of Zurich.1IntroductionVenture capital (VC) and venture capitalists play a key role in promoting innovativefir...
