Part 3 Flashcards
Graham, J. R., 2022, “Corporate Finance and Reality”: 1, In his presidential address, Graham describes how CFOs increasingly focus on the near term (reading ‘Graham, 2022, Presidential address: Corporate finance and reality’). What evidence about CFO actions leads to that conclusion? And what are the consequences of short-termism? ME2024
a. Graham (2022) finds that CFOs focus on short-term planning, relying on financial forecasts that extend only about two years, which limits long-term investment strategies. b. Evidence includes firms prioritizing projects with quick payback periods, using conservative hurdle rates, and hesitating to change capital structure even when market conditions shift. c. CFOs also prefer financial flexibility over optimizing tax benefits of debt, reflecting their risk aversion and reluctance to leverage long-term growth opportunities. d. Short-termism results in underinvestment in innovation and strategic expansion, as firms allocate resources to immediate returns rather than long-term value creation. e. This behavior can weaken competitiveness, increase vulnerability to economic shocks, and contradict traditional finance theories advocating long-term shareholder value maximization.
Graham, J. R., 2022, “Corporate Finance and Reality”: 2, Question: Why do CFOs prioritize financial flexibility over optimizing capital structure, and how does this contrast with traditional finance theories?
Short Answer: CFOs avoid high debt levels to maintain financial flexibility, even though finance theory suggests firms should balance the tax benefits of debt with bankruptcy costs (Modigliani & Miller). In reality, firms prefer stability, keeping debt ratios constant rather than adjusting to market conditions, showing a gap between theory and practice.
Graham, J. R., 2022, “Corporate Finance and Reality”: 3, Question: What are the main reasons why CFOs’ financial forecasts tend to be overly optimistic?
Short Answer: CFOs underestimate risks and fail to fully adjust future forecasts based on past errors. They use high investment hurdle rates as a risk buffer, but forecasting biases still lead to frequent financial surprises.
Graham, J. R., 2022, “Corporate Finance and Reality”: 4, Question: Why do many CFOs continue to use outdated financial models such as CAPM and the payback method despite advances in financial theory?
Short Answer: CFOs rely on simple, well-understood decision-making rules that are easy to apply, even though more sophisticated models (e.g., NPV, WACC) provide better optimization. CAPM persists due to its ease of use and familiarity, despite empirical weaknesses.
Graham, J. R., 2022, “Corporate Finance and Reality”: 5, Question: How does the shift from shareholder value maximization to stakeholder-oriented finance impact corporate decision-making?
Short Answer: Firms now consider employees, customers, and societal factors alongside shareholder returns. This shift changes capital allocation decisions, often leading to more cautious financial policies and long-term sustainability focus rather than short-term profit maximization.
Graham, J. R., 2022, “Corporate Finance and Reality”: 6, Question: Why do CFOs prefer share buybacks over dividends, and what role does market timing play in this decision?
Short Answer: Buybacks offer flexibility, allowing firms to return cash to shareholders without committing to regular payouts like dividends. CFOs time buybacks when they believe the stock is undervalued, contradicting the efficient market hypothesis.
Kahle & Stulz, 2017, “Is the US Public Corporation in Trouble?”: 1, In their paper ‘Is the US public corporation in trouble?’, Kahle and Stulz (2017) show that the number and percentage of small public firms has dropped dramatically in recent years. Explain the main reasons why small companies have become less interested in going public.
1) High Regulatory Costs – Compliance with laws like the Sarbanes-Oxley Act makes IPOs expensive and complex for small firms.
2) Private Capital Availability – Venture capital and private equity offer easier, more flexible funding without public market scrutiny.
3)Increased Mergers & Acquisitions (M&A) – Many small firms get acquired before going public, reducing IPO numbers.
4)Institutional Investor Preferences – Big investors favor large, stable companies, making it harder for small firms to attract public market interest.
Public Market Pressures – Short-term earnings expectations discourage small firms that prioritize long-term growth and innovation.
5) Want to stay focused on growth not earnings
Kahle & Stulz, 2017, “Is the US Public Corporation in Trouble?”: 2, The fall in the number of public companies in the US has been especially prominent among small firms. Name and briefly explain at least four reasons why this decrease has been most pronounced in this subset of firms.
a. High Regulatory Costs – Compliance with laws like the Sarbanes-Oxley Act makes IPOs expensive and complex for small firms. b. Private Capital Availability – Venture capital and private equity offer easier, more flexible funding without public market scrutiny. c. Increased Mergers & Acquisitions (M&A) – Many small firms get acquired before going public, reducing IPO numbers. d. Institutional Investor Preferences – Big investors favor large, stable companies, making it harder for small firms to attract public market interest. e. Public Market Pressures – Short-term earnings expectations discourage small firms that prioritize long-term growth and innovation.
Kahle & Stulz, 2017, “Is the US Public Corporation in Trouble?”: 3, Question: How has the aging of public firms affected corporate investment strategies?
Short Answer: Public firms are older and larger, with an average age increase from 10.9 years (1975) to 18.4 years (2015). More focus on R&D over capital expenditures (CAPEX) due to shifts in business models. Less risk-taking, as established firms prioritize stability over aggressive expansion. Higher cash holdings, reducing reliance on external financing. More share buybacks instead of reinvesting in growth opportunities.
Kahle & Stulz, 2017, “Is the US Public Corporation in Trouble?”: 4, Question: Why have stock buybacks replaced dividends as the dominant payout strategy?
Short Answer: More flexibility – Firms can adjust buybacks more easily than dividends. Stock price management – Buybacks help boost earnings per share (EPS). Tax efficiency – Capital gains from buybacks are taxed more favorably than dividends. Shift from growth to value preservation – Firms prioritize financial engineering over expansion. Appeals to institutional investors, who prefer buybacks for predictable returns.
Kahle & Stulz, 2017, “Is the US Public Corporation in Trouble?”: 5, Question: What role does institutional investor dominance play in the decline of small public firms?
Short Answer: Institutional ownership rose from 17.7% (1980) to 50.4% (2015), shifting market power. Funds prefer investing in large, stable companies, limiting capital access for small firms. Small firms struggle with liquidity, making them less attractive to large investors. Blockholders (large shareholders) influence governance, leading to increased M&A activity. Small firms are more likely to be taken private, rather than compete for public investment.
Kahle & Stulz, 2017, “Is the US Public Corporation in Trouble?”: 6, Question: How has the rise of private markets impacted corporate finance?
Short Answer: Private markets provide capital without public disclosure requirements. Private equity and venture capital offer high funding levels, reducing IPO necessity. Companies stay private longer, delaying or avoiding public listing altogether. More leverage in private markets, increasing financial risks. Private firms can focus on long-term strategies, avoiding public market short-termism.
Frost, Schrimpf & Tarashev, 2021, “The Rise of Private Markets”: 1, Private markets revolve around funds gathered from institutional investors by ‘alternative asset managers’ (AAM). List the AAM types in private markets and describe their key features. What are the major investors, and why are they investing in private markets?
AAM Types & Key Features: Private Equity (PE) – Acquires private companies or takes public firms private using leveraged buyouts. Venture Capital (VC) – Invests in early-stage, high-growth startups. Private Credit Funds – Provide loans to companies lacking traditional bank financing. Hedge Funds – Manage portfolios with high-risk strategies. Real Asset Funds – Invest in infrastructure, real estate, commodities. Major Investors & Reasons: Institutional investors (pension funds, sovereign wealth funds, insurance companies) seek higher returns and diversification. Endowments and family offices seek long-term capital appreciation and tax advantages. Private markets offer lower short-term volatility and less public scrutiny.
Frost, Schrimpf & Tarashev, 2021, “The Rise of Private Markets”: 2, Describe the key differences between public and private markets.
a. Regulation & Transparency – Public markets have high regulatory oversight, while private markets have minimal oversight. b. Liquidity – Public markets allow easy share trading; private markets require long-term commitments. c. Investor Access – Public markets are open to retail investors; private markets mainly to institutional/accredited investors. d. Valuation & Pricing – Public market prices adjust in real-time; private markets have infrequent valuations. e. Growth Focus – Public firms focus on quarterly earnings; private firms focus on long-term strategies.
Frost, Schrimpf & Tarashev, 2021, “The Rise of Private Markets”: 1, Question: Why have private markets grown as an alternative to public markets?
Short Answer: Regulatory burden in public markets (Sarbanes-Oxley) makes private markets more attractive. Institutional investor demand for higher returns has grown. Flexible capital structures let private firms focus on long-term growth. PE, VC, and private credit provide easier funding options.
Frost, Schrimpf & Tarashev, 2021, “The Rise of Private Markets”: 2, Question: What are the key risks associated with private markets?
Short Answer: Limited liquidity – long-term commitments vs. public assets. Leverage risk – high debt in private deals. Lack of transparency – less financial data disclosed. Procyclicality – booms attract capital, downturns reduce deal activity.
Frost, Schrimpf & Tarashev, 2021, “The Rise of Private Markets”: 3, Question: How do private equity (PE) and venture capital (VC) differ in their investment approaches?
Short Answer: PE focuses on buying mature companies, restructuring them, then selling for profit. VC invests in early-stage startups with higher risk and potential returns. PE uses high leverage, VC relies on equity. VC takes smaller stakes across many firms, PE acquires majority control of fewer companies.
Frost, Schrimpf & Tarashev, 2021, “The Rise of Private Markets”: 4, Question: Why are institutional investors shifting more capital to private markets?
Short Answer: Higher return potential vs. public markets. Portfolio diversification with different risk profiles. Lower short-term volatility due to less frequent valuations. Access to unique investment opportunities unavailable on public exchanges.
Frost, Schrimpf & Tarashev, 2021, “The Rise of Private Markets”: 5, Question: What is the role of private credit funds in financial markets?
Short Answer: They lend to firms that lack traditional bank financing. They finance leveraged buyouts for PE firms. They offer customized lending solutions with higher yields than typical bonds. They increase financial risk due to high leverage and potential defaults.
BIS, 2022, “The Future Monetary System”: 1, What are the core functions a monetary system must fulfill to serve society effectively? Why is trust in the system crucial?
Core Functions: Store of Value, Medium of Exchange, Unit of Account, Efficient & Inclusive Payments, Financial Stability. Trust is crucial because money’s acceptance depends on confidence in its stability; loss of trust leads to inflation, runs, and systemic failures; regulation and central banks maintain credibility.
BIS, 2022, “The Future Monetary System”: 2, Why does the BIS argue that stablecoins are not a reliable foundation for the future monetary system? What are the key weaknesses of stablecoins?
Why Unreliable: Depend on reserves in banks and face regulatory uncertainty and fragmentation. Key Weaknesses: De-pegging risk if reserves fail; algorithmic failures (e.g., Terra/Luna); lack of transparency; not universally accepted; risk of digital bank runs.
BIS, 2022, “The Future Monetary System”: 1, Question: Why does the BIS emphasize the need for a central bank-backed digital monetary system?
Short Answer: Ensures stability, as central banks guarantee value; supports financial inclusion through universal access; reduces fragmentation vs. multiple private solutions; enables innovation with CBDCs integrating into smart contracts/tokenized assets.
BIS, 2022, “The Future Monetary System”: 2, Question: What are the main challenges of integrating blockchain into the financial system?
Short Answer: Scalability issues with mass transactions, high fees/slow speed in PoW, regulatory uncertainty with decentralized networks, interoperability problems across different blockchains.
BIS, 2022, “The Future Monetary System”: 3, Question: How does tokenization impact the financial system?
Short Answer: It increases efficiency (instant transfers), enhances transparency (public ledger), expands market access (fractional ownership), and raises regulatory concerns (difficult to oversee borderless assets).
BIS, 2022, “The Future Monetary System”: 4, Question: Why does BIS argue that stablecoins are not a long-term solution for financial stability?
Short Answer: They depend on reserves in traditional finance, face fraud/mismanagement risks, algorithmic models have shown instability, and a fragmented stablecoin ecosystem lowers efficiency.
BIS, 2022, “The Future Monetary System”: 5, Question: What are the benefits of Central Bank Digital Currencies (CBDCs) over private digital currencies?
Short Answer: CBDCs ensure stability vs. de-pegging risks, provide universal access, maintain monetary policy control, integrate with national financial systems, reducing regulatory issues.
Schär, F., 2021, “Decentralized Finance: On Blockchain and Smart Contract-Based Financial Markets”: 1, Explain the main risk of centralized cryptocurrency exchanges. How does decentralization help mitigate these risks?
Risk: Centralized exchanges are vulnerable to hacks, insolvency, and fund mismanagement because users do not hold their private keys. Decentralization: DEXs let users trade directly from their own wallets, removing third-party custody and increasing transparency.
Schär, F., 2021, “Decentralized Finance: On Blockchain and Smart Contract-Based Financial Markets”: 2, Describe at least two types of decentralized exchanges (DEXs) and explain how they work in practice.
AMMs: Use liquidity pools and formulas (x*y=k) instead of order books (Uniswap, Curve). Order Book-Based DEXs: Keep decentralized order books and settle on-chain (dYdX).
Schär, F., 2021, “Decentralized Finance: On Blockchain and Smart Contract-Based Financial Markets”: 3, Given the full control of one’s funds when trading on a decentralized exchange, why do most investors still use centralized exchanges for trading?
They offer better liquidity and faster execution, user-friendly interfaces with fiat on-ramps, customer support, regulatory compliance, and often lower fees in normal conditions.
Schär, F., 2021, “Decentralized Finance: On Blockchain and Smart Contract-Based Financial Markets”: 1, Question: What are the key advantages of DeFi over traditional financial systems?
Short Answer: No intermediaries (smart contracts), full transparency (public blockchain), accessibility (no KYC required), composability (protocols integrate).
Schär, F., 2021, “Decentralized Finance: On Blockchain and Smart Contract-Based Financial Markets”: 2, Question: What are the risks associated with DeFi, and how do they compare to risks in traditional finance?
Short Answer: Smart contract vulnerabilities (bugs), lack of regulation (no consumer protections), high volatility in crypto assets, oracle manipulation risks. These can be more severe than in traditional finance due to minimal oversight.
Schär, F., 2021, “Decentralized Finance: On Blockchain and Smart Contract-Based Financial Markets”: 3, Question: How do Automated Market Makers (AMMs) work, and what are their main limitations?
Short Answer: They replace order books with liquidity pools and price formulas like x*y=k. Limitations: Impermanent loss for liquidity providers if prices move, arbitrage exploits due to slow price updates.
Schär, F., 2021, “Decentralized Finance: On Blockchain and Smart Contract-Based Financial Markets”: 4, Question: What role do stablecoins play in DeFi, and what are the risks associated with them?
Short Answer: Stablecoins provide stability for lending, borrowing, and trading; risks include de-pegging, algorithmic failures (Terra/Luna), and regulatory uncertainty affecting liquidity.
Schär, F., 2021, “Decentralized Finance: On Blockchain and Smart Contract-Based Financial Markets”: 5, Question: What is the significance of composability in DeFi, and why is it both a strength and a risk?
Short Answer: Strength: Protocols can interoperate and build on each other, creating an efficient ecosystem. Risk: One protocol failure can cascade through interconnected platforms.
Makarov & Schoar, 2022, “Cryptocurrencies and Decentralized Finance”: 1, Recently, FTX, a centralized cryptocurrency exchange, collapsed, leaving users unable to withdraw funds. Explain the main risks of centralized cryptocurrency exchanges and how decentralized finance (DeFi) addresses these risks.
Main risks of CEXs: Custodial risk (users lack private keys), hacking risk (large centralized pools of funds), insolvency risk (mismanagement). DeFi addresses them by letting users keep self-custody, automating trades via smart contracts, and operating DEXs without centralized fund pools.
Makarov & Schoar, 2022, “Cryptocurrencies and Decentralized Finance”: 2, Describe the main difference between permissioned and permissionless ledgers. On which type of ledger is DeFi based?
Permissioned: Controlled by a central authority limiting who validates transactions. Permissionless: Open to anyone, validated by decentralized participants (Bitcoin, Ethereum). DeFi is based on permissionless ledgers.
Makarov & Schoar, 2022, “Cryptocurrencies and Decentralized Finance”: 3, On a permissionless ledger, describe two different consensus mechanisms that ensure the stability of the system. Briefly outline the process behind each one.
Proof of Work (PoW): Miners solve cryptographic puzzles, very secure but energy-intensive. Proof of Stake (PoS): Validators stake tokens to confirm transactions, less energy use but can favor large holders.
Makarov & Schoar, 2022, “Cryptocurrencies and Decentralized Finance”: 1, Question: How does DeFi differ from traditional finance in terms of structure and accessibility?
Short Answer: No intermediaries (smart contracts), permissionless access (anyone with internet), transparency (blockchain-based vs. bank-ledger), automation (self-executing contracts).
Makarov & Schoar, 2022, “Cryptocurrencies and Decentralized Finance”: 2, Question: What are the risks of smart contracts in DeFi?
Short Answer: Code vulnerabilities can cause large losses, transactions are irreversible, some projects have admin keys that can override contracts, and oracle data feeds can be manipulated.
Makarov & Schoar, 2022, “Cryptocurrencies and Decentralized Finance”: 3, Question: Why do stablecoins play a crucial role in DeFi, and what are their risks?
Short Answer: They reduce volatility for lending, borrowing, and trading. Risks include opaque reserves, de-pegging, and regulatory clampdowns that can disrupt DeFi stability.
Makarov & Schoar, 2022, “Cryptocurrencies and Decentralized Finance”: 4, Question: How do DeFi lending and borrowing platforms function?
Short Answer: Lenders deposit crypto into liquidity pools for interest, borrowers post overcollateralized crypto to get loans, flash loans require no collateral if repaid instantly, and rates depend on supply-demand.
Makarov & Schoar, 2022, “Cryptocurrencies and Decentralized Finance”: 5, Question: What is the economic impact of DeFi’s permissionless nature?
Short Answer: It broadens financial inclusion, lowers intermediation costs, but increases systemic risk (no oversight) and creates regulatory challenges (money laundering, tax evasion).
Foley, O’Neill & Putniņš, 2023, “A Better Market Design? Applying Automated Market Makers to Traditional Financial Markets”: 1, Explain why AMMs might be able to lower financial market trading costs in traditional asset classes. You may refer to the reading “A Better Market Design? Applying ‘Automated Market Makers’ to Traditional Financial Markets” and discussions in lectures.
Lower intermediation costs by removing traditional market makers and brokers, continuous liquidity from pools reduces price volatility, automation via smart contracts lowers infrastructure costs, and AMMs can improve access in illiquid assets like corporate bonds or commodities.
Foley, O’Neill & Putniņš, 2023, “A Better Market Design? Applying Automated Market Makers to Traditional Financial Markets”: 1, Question: How do Automated Market Makers (AMMs) differ from traditional market makers (TMMs)?
Short Answer: AMMs use liquidity pools and a formula (x*y=k), while TMMs rely on order books and manual spread settings. AMMs operate without intermediaries, TMMs involve active liquidity management. AMMs excel in high-liquidity, low-volatility environments, but TMMs adapt more quickly to new information.
Foley, O’Neill & Putniņš, 2023, “A Better Market Design? Applying Automated Market Makers to Traditional Financial Markets”: 2, Question: What are the main risks associated with AMMs?
Short Answer: Impermanent loss for liquidity providers when prices shift, arbitrage exploitation due to slow price updates, slippage for large trades, and liquidity fragmentation across multiple pools.
Foley, O’Neill & Putniņš, 2023, “A Better Market Design? Applying Automated Market Makers to Traditional Financial Markets”: 3, Question: What types of financial assets could benefit from AMM adoption in traditional markets?
Short Answer: Forex (automated liquidity), commodities (oil, gold), corporate bonds and other illiquid assets, and tokenized real-world assets (real estate, securities) could gain from AMM-based trading.
Foley, O’Neill & Putniņš, 2023, “A Better Market Design? Applying Automated Market Makers to Traditional Financial Markets”: 4, Question: How can AMMs be improved to address their inefficiencies in traditional markets?
Short Answer: Hybrid models combining AMMs with central liquidity management, dynamic fee adjustments to protect providers in high volatility, improved oracle feeds, and Layer 2 solutions for faster/cheaper transactions.
Foley, O’Neill & Putniņš, 2023, “A Better Market Design? Applying Automated Market Makers to Traditional Financial Markets”: 5, Question: Why haven’t AMMs fully replaced traditional market makers in financial markets?
Short Answer: AMMs can be exploited by informed traders, TMMs adjust faster to news, regulatory constraints limit AMM adoption, and institutional investors want predictable execution.
Carstens, Nilekani, 2024, “Finternet: The Financial System for the Future”: 1, What is the core vision of the “Finternet” and how does it aim to transform the financial system?
Finternet is a globally interconnected financial system inspired by the internet, enabling instant, low-cost, and borderless transactions. Unified ledgers integrate financial assets (money, securities, real-world assets) into a single programmable system. Eliminates inefficiencies by reducing reliance on intermediaries like banks and clearinghouses. Tokenization enables real-time settlement and better access to financial services.
Carstens, Nilekani, 2024, “Finternet: The Financial System for the Future”: 2, Why is the current financial system inefficient, and how does the Finternet propose to address these inefficiencies?
Current inefficiencies: Slow settlements (cross-border payments, securities clearing take days). High costs due to banks, brokers, and clearinghouses. Regulatory compliance delays (AML/KYC processes). Fragmented systems prevent seamless asset transfers. Finternet solutions: Smart contracts automate compliance and transactions. Unified ledgers ensure transparency and real-time settlement. Tokenization eliminates the need for third parties, lowering costs.
Carstens, Nilekani, 2024, “Finternet: The Financial System for the Future”: 3, What are unified ledgers, and why are they central to the Finternet model?
Definition: Digital platforms integrating money, securities, and real-world assets (RWA) into a single programmable financial system. Features: Instant settlement of transactions without intermediaries. Built-in compliance tools for automated KYC/AML. Transparent ownership records stored immutably. Smart contract automation for self-executing transactions. Impact: Reduces financial fragmentation, lowers transaction costs, and improves access.
Carstens, Nilekani, 2024, “Finternet: The Financial System for the Future”: 4, How does tokenization work in the Finternet, and what are its key benefits?
Tokenization converts financial assets into digital tokens stored on a blockchain. Types of tokenized assets: Tokenized money: Central bank digital currencies (CBDCs), stablecoins. Tokenized securities: Stocks, bonds, and real estate. Tokenized commodities: Gold, oil, and agricultural assets. Key benefits: Faster and more efficient asset transfers. Fractional ownership allows greater investment access. Real-time settlement eliminates counterparty risks.
Carstens, Nilekani, 2024, “Finternet: The Financial System for the Future”: 5, What role do smart contracts play in the Finternet, and what are their limitations?
Smart contracts are self-executing agreements that automate financial transactions. Roles in Finternet: Auto-execution of payments and settlements. Automated compliance checks (KYC, AML). Liquidity management in decentralized financial markets. Limitations: Code vulnerabilities can lead to security breaches. Smart contracts are rigid and cannot adjust to unforeseen changes. Regulatory uncertainty—difficult to enforce legal oversight.
Carstens, Nilekani, 2024, “Finternet: The Financial System for the Future”: 6, What are the main risks associated with implementing the Finternet?
Regulatory coordination challenges – Different countries have conflicting financial laws. Privacy concerns – Full transparency may reduce financial anonymity. Cybersecurity threats – A fully digital financial system is vulnerable to hacks. Technology adoption barriers – Financial institutions may struggle to upgrade legacy systems. Potential concentration of power – If ledgers are controlled by a few central banks or firms, the system may not be truly decentralized.
Carstens, Nilekani, 2024, “Finternet: The Financial System for the Future”: 7, How could the Finternet improve financial inclusion, particularly in developing countries?
Provides access to banking services for the unbanked. Reduces transaction costs for remittances and small businesses. Tokenization enables micro-investments (e.g., fractional real estate or stock ownership). Removes dependence on physical banking infrastructure, allowing access via mobile devices. Encourages alternative credit models using blockchain-based identity verification.
Carstens, Nilekani, 2024, “Finternet: The Financial System for the Future”: 8, What regulatory measures could ensure that the Finternet remains stable and secure?
Hybrid models combining public and private oversight. Stronger cybersecurity frameworks to prevent hacks. Identity verification through private-key cryptography. Regulated validators to ensure compliance with financial laws. Auditing of smart contracts to prevent coding vulnerabilities.
Carstens, Nilekani, 2024, “Finternet: The Financial System for the Future”: 9, How does the Finternet compare to existing decentralized finance (DeFi) models?
Both aim to eliminate intermediaries and improve efficiency. Finternet focuses on integrating regulated financial institutions, while DeFi operates outside traditional banking. DeFi is fully decentralized, whereas Finternet is a hybrid system with regulatory oversight. Finternet ensures compliance through unified ledgers, while DeFi lacks built-in compliance mechanisms.
Carstens, Nilekani, 2024, “Finternet: The Financial System for the Future”: 10, What is the potential impact of the Finternet on global economic stability?
Faster capital flows could improve financial stability. Better transparency reduces systemic risk (e.g., shadow banking crises). More efficient payments could enhance global trade. Over-reliance on digital infrastructure could introduce new cybersecurity threats. Regulatory misalignment between countries could create instability in cross-border finance
