Cryptocurrency Market Reaction Abnormal Returns Acceptance of Cryptocurrency Form of Payment stock market
Abstract:
This paper examines whether a market reaction occurs due to publicly traded companies announcing their acceptance of cryptocurrency as a form of payment. The rationale behind this research is that there has been observable dramatic investor sentiment on the use and existence of cryptocurrency both as a currency and an investment vehicle. We theorize that due to investors’ strong opinions on cryptocurrency, there may be a market reaction to a company’s announcement of its acceptance. To test this, we perform an event study on a sample of thirty firms in addition to multiple levels of analysis on the performance and characteristics of the firms. We find that firms announcing their acceptance of cryptocurrency tend to be small, fall into the information technology or consumer discretionary sectors, and underperform the market index. We also find no abnormal returns on or directly after the event dates, indicating no market reaction due to the event. We believe further research and testing can be done to determine why these firms are significantly underperforming the index and if there is any correlation to their associations with cryptocurrency.
