Regulation in the realm of cryptocurrency investment: an examination of equity investors’ behavior
Joseph Hashem, Marco Lam · Managerial Finance · 2025
Purpose This study examines whether news of cryptocurrency-related regulations is associated with a significant market reaction towards publicly traded firms vested in the cryptocurrency domain. Design/methodology/approach We conduct an event study that is centered around President Biden’s Executive Order on Ensuring Responsible Development of Digital Assets (March 9, 2022) as well as the Securities and Exchange Commission (SEC) staff accounting bulletin #121 (March 24, 2022). Changes in market capitalization and stock price volatility are used to measure investors’ reaction to these events. Findings The long-term buy-and-hold abnormal returns associated with both events indicate a positive reaction by investors. In the short term, the pre- and post-event windows show mixed results. Research limitations/implications We inform the debate on signaling. Indeed, a number of firms may invest in cryptocurrency because this relates to their business model. However, other firms invest to signal that they are trendy. We investigate whether investors feel the added value of cryptocurrency investment is constrained by regulations or if such regulations add a layer of legitimacy to the cryptocurrency domain. Practical implications To date, cryptocurrencies are regulated in line with other financial instruments. Going forward, we expect more regulations specific to the cryptocurrencies. We provide foundational evidence on whether cryptocurrency investment adds net value to a publicly traded firm. Furthermore, our findings should be of interest to regulatory bodies and lawmakers, who are interested in better understanding the market impact of their comments and decisions. Originality/value This paper fulfills a need to examine the net impact of regulations and firms’ investment policies regarding cryptocurrencies.