Pub Date : 2025-08-29DOI: 10.1016/j.jimonfin.2025.103420
Zhi Jin , Tingting Duan , Bingxuan Lin , Ke Xu
This paper investigates the impact of stock market liberalization on corporate R&D disclosure using the Mainland China–Hong Kong Stock Connect program as a quasi-natural experiment. Contrary to the widely held view that liberalization enhances overall corporate transparency, we find that the topics of R&D information disclosure are more scattered, and the narrative is less specific following liberalization. This effect is particularly pronounced among firms with higher proprietary costs. We argue that increased exposure to foreign investors intensifies competitive pressures, leading firms to strategically limit public disclosure of sensitive R&D information to mitigate the risk of information leakage. Additionally, we document a rise in private communications with investors post-liberalization, particularly on R&D-related topics, suggesting a deliberate shift toward more selective disclosure channels where firms can better control the audience and content of information shared.
{"title":"Stock market liberalization and corporate R&D disclosure: evidence from China","authors":"Zhi Jin , Tingting Duan , Bingxuan Lin , Ke Xu","doi":"10.1016/j.jimonfin.2025.103420","DOIUrl":"10.1016/j.jimonfin.2025.103420","url":null,"abstract":"<div><div>This paper investigates the impact of stock market liberalization on corporate R&D disclosure using the Mainland China–Hong Kong Stock Connect program as a quasi-natural experiment. Contrary to the widely held view that liberalization enhances overall corporate transparency, we find that the topics of R&D information disclosure are more scattered, and the narrative is less specific following liberalization. This effect is particularly pronounced among firms with higher proprietary costs. We argue that increased exposure to foreign investors intensifies competitive pressures, leading firms to strategically limit public disclosure of sensitive R&D information to mitigate the risk of information leakage. Additionally, we document a rise in private communications with investors post-liberalization, particularly on R&D-related topics, suggesting a deliberate shift toward more selective disclosure channels where firms can better control the audience and content of information shared.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"159 ","pages":"Article 103420"},"PeriodicalIF":3.3,"publicationDate":"2025-08-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144997592","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-08-26DOI: 10.1016/j.jimonfin.2025.103419
Christian R. Proaño , Leonardo Quero Virla , Till Strohsal
This paper explores the interaction between the global financial cycle (GFCy) and country-specific macro-financial dynamics. We investigate two alternative measures of the GFCy, the CBOE VIX index and Rey (2013)’s global factor, and equity prices, house prices, and aggregate credit volume as national variables. By means of a continuous wavelet analysis and a structural VAR framework, we explore such interaction in the frequency- and time-domain for 12 countries. Our evidence reveals that a strong and uniform relationship between the global financial cycle and national macro-financial series exists only during periods of global financial stress. Beyond those periods, we find significant variation in the relationship – both across time and countries. The choice of the global financial cycle proxy plays a very limited role.
{"title":"How strong is the link between the global financial cycle and national macro-financial dynamics? A wavelet analysis","authors":"Christian R. Proaño , Leonardo Quero Virla , Till Strohsal","doi":"10.1016/j.jimonfin.2025.103419","DOIUrl":"10.1016/j.jimonfin.2025.103419","url":null,"abstract":"<div><div>This paper explores the interaction between the global financial cycle (GFCy) and country-specific macro-financial dynamics. We investigate two alternative measures of the GFCy, the CBOE VIX index and <span><span>Rey (2013)</span></span>’s global factor, and equity prices, house prices, and aggregate credit volume as national variables. By means of a continuous wavelet analysis and a structural VAR framework, we explore such interaction in the frequency- and time-domain for 12 countries. Our evidence reveals that a strong and uniform relationship between the global financial cycle and national macro-financial series exists only during periods of global financial stress. Beyond those periods, we find significant variation in the relationship – both across time and countries. The choice of the global financial cycle proxy plays a very limited role.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"159 ","pages":"Article 103419"},"PeriodicalIF":3.3,"publicationDate":"2025-08-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144933800","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-08-23DOI: 10.1016/j.jimonfin.2025.103418
Manapol Ekkayokkaya , Pisploen Ploenchitt , Christian C.P. Wolff
We examine whether and how banks’ diversification strategy responds to expected investment opportunities. We find evidence consistent with the view that whether banks diversify to develop internal funding capability in response to good prospects, or to search for new growth opportunities in response to poor prospects in the current activity, depends on external capital constraints. The results further suggest that banks find it optimal to have immediate control over the internal fund allocation rather than relying on the allocation managed by their group parent. We also find evidence suggesting that although international diversification can facilitate activity diversification, the former is unlikely to substitute for the latter. In addition, there is no evidence that activity diversification by banks reflects inefficient diversification.
{"title":"Diversification strategies and investment opportunities in the international banking industry","authors":"Manapol Ekkayokkaya , Pisploen Ploenchitt , Christian C.P. Wolff","doi":"10.1016/j.jimonfin.2025.103418","DOIUrl":"10.1016/j.jimonfin.2025.103418","url":null,"abstract":"<div><div>We examine whether and how banks’ diversification strategy responds to expected investment opportunities. We find evidence consistent with the view that whether banks diversify to develop internal funding capability in response to good prospects, or to search for new growth opportunities in response to poor prospects in the current activity, depends on external capital constraints. The results further suggest that banks find it optimal to have immediate control over the internal fund allocation rather than relying on the allocation managed by their group parent. We also find evidence suggesting that although international diversification can facilitate activity diversification, the former is unlikely to substitute for the latter. In addition, there is no evidence that activity diversification by banks reflects inefficient diversification.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"159 ","pages":"Article 103418"},"PeriodicalIF":3.3,"publicationDate":"2025-08-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144925894","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-08-22DOI: 10.1016/j.jimonfin.2025.103417
Shujian Guo , Zhiduan Xu , Yilong Ruanzhou
In this paper, we introduce a novel econometric framework to investigate the producers and recipients of the spillover effect. We find that proximity to neighboring economies with pro-business policies is associated with improvements in a domestic economy’s business environment. This positive spatial spillover is predominantly generated by high-income economies, while low-income economies exhibit negligible impact on their neighbors. Furthermore, non-African low-income economies benefit more from their neighbors’ business reforms compared to high-income ones. Our analysis also reveals that the magnitude of the spillover effect is moderated by the physical adjacency (land or maritime borders) and political alignment between neighbors. Only high-income economies demonstrate the ability to translate an enhanced business environment into superior economic outcomes. We highlight the importance of business connections between neighboring economies.
{"title":"Are strong neighbors good neighbors? “Doing business” spatial spillover effects and policy learning","authors":"Shujian Guo , Zhiduan Xu , Yilong Ruanzhou","doi":"10.1016/j.jimonfin.2025.103417","DOIUrl":"10.1016/j.jimonfin.2025.103417","url":null,"abstract":"<div><div>In this paper, we introduce a novel econometric framework to investigate the producers and recipients of the spillover effect. We find that proximity to neighboring economies with pro-business policies is associated with improvements in a domestic economy’s business environment. This positive spatial spillover is predominantly generated by high-income economies, while low-income economies exhibit negligible impact on their neighbors. Furthermore, non-African low-income economies benefit more from their neighbors’ business reforms compared to high-income ones. Our analysis also reveals that the magnitude of the spillover effect is moderated by the physical adjacency (land or maritime borders) and political alignment between neighbors. Only high-income economies demonstrate the ability to translate an enhanced business environment into superior economic outcomes. We highlight the importance of business connections between neighboring economies.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"158 ","pages":"Article 103417"},"PeriodicalIF":3.3,"publicationDate":"2025-08-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144907038","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-08-19DOI: 10.1016/j.jimonfin.2025.103416
Amelie Schischke, Andreas Rathgeber
In this study, we examine whether and how the impact of monetary policy on commodity markets changed due to the unconventional monetary policy actions, such as large-scale asset purchase programs and forward guidance, implemented by the Federal Reserve when the interest rate reached its zero lower bound (ZLB) posterior to the financial crisis. Utilizing a structural vector autoregressive (SVAR) model and a sub-period analysis, we identify a significant influence of interest rates on commodity prices before the crisis, with a contractionary monetary policy shock leading to rising prices. However, during the ZLB period, unconventional monetary policy shocks resulted in declining commodity prices, highlighting a directional shift. Our findings underscore the role of monetary policy mechanisms in shaping commodity markets and reveal variations across commodity classes, particularly industrial metals and precious metals. These insights hold practical implications for investors and policymakers.
{"title":"Commodities and monetary policy—the role of interest rates revisited","authors":"Amelie Schischke, Andreas Rathgeber","doi":"10.1016/j.jimonfin.2025.103416","DOIUrl":"10.1016/j.jimonfin.2025.103416","url":null,"abstract":"<div><div>In this study, we examine whether and how the impact of monetary policy on commodity markets changed due to the unconventional monetary policy actions, such as large-scale asset purchase programs and forward guidance, implemented by the Federal Reserve when the interest rate reached its zero lower bound (ZLB) posterior to the financial crisis. Utilizing a structural vector autoregressive (SVAR) model and a sub-period analysis, we identify a significant influence of interest rates on commodity prices before the crisis, with a contractionary monetary policy shock leading to rising prices. However, during the ZLB period, unconventional monetary policy shocks resulted in declining commodity prices, highlighting a directional shift. Our findings underscore the role of monetary policy mechanisms in shaping commodity markets and reveal variations across commodity classes, particularly industrial metals and precious metals. These insights hold practical implications for investors and policymakers.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"158 ","pages":"Article 103416"},"PeriodicalIF":3.3,"publicationDate":"2025-08-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144911632","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-08-15DOI: 10.1016/j.jimonfin.2025.103415
Kevin Robertson, Rene Zhang
The growing significance of derivatives within the fragmented bitcoin trading ecosystem has heightened scrutiny regarding the markets that lead bitcoin’s price discovery. This paper delves into the intricate dynamics of bitcoin spot and futures trade activity, employing a robust framework for high-frequency lead-lag analysis utilizing the Hayashi-Yoshida estimator. Our findings reveal that the CME bitcoin futures market plays a leading role in price formation, with transaction size emerging as a critical determinant of market leadership. Furthermore, we provide an in-depth exploration of the unique microstructure of bitcoin markets, highlighting how varying trade sparsity influences price discovery metrics. This comprehensive analysis contributes valuable insights for both market participants and regulators, fostering a deeper understanding of the factors that shape market efficiency.
{"title":"Price discovery in bitcoin spot and futures markets","authors":"Kevin Robertson, Rene Zhang","doi":"10.1016/j.jimonfin.2025.103415","DOIUrl":"10.1016/j.jimonfin.2025.103415","url":null,"abstract":"<div><div>The growing significance of derivatives within the fragmented bitcoin trading ecosystem has heightened scrutiny regarding the markets that lead bitcoin’s price discovery. This paper delves into the intricate dynamics of bitcoin spot and futures trade activity, employing a robust framework for high-frequency lead-lag analysis utilizing the Hayashi-Yoshida estimator. Our findings reveal that the CME bitcoin futures market plays a leading role in price formation, with transaction size emerging as a critical determinant of market leadership. Furthermore, we provide an in-depth exploration of the unique microstructure of bitcoin markets, highlighting how varying trade sparsity influences price discovery metrics. This comprehensive analysis contributes valuable insights for both market participants and regulators, fostering a deeper understanding of the factors that shape market efficiency.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"159 ","pages":"Article 103415"},"PeriodicalIF":3.3,"publicationDate":"2025-08-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145049960","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-08-14DOI: 10.1016/j.jimonfin.2025.103408
Hugo Benedetti , Gabriel Rodríguez-Garnica
Cryptoassets, particularly tokens, have garnered investor interest due to high returns, yet comprehensive studies examining on-chain transaction data to assess their intrinsic value remain limited. This study addresses this gap by introducing new on-chain transaction-based measures of token usage, crypto-exchange supply pressures, and aggregate transaction intention (trading versus usage/holding). Using over 180 million records of Ethereum-based-tokens’ transaction data, we categorize on-chain transactions as peer-to-peer usage or crypto-exchange-related. Our findings show that while increased token usage intensity, whether through peer-to-peer or exchange transactions, positively correlates with higher token returns, imbalances in exchange flows have the opposite effect. Specifically, increased token inflows to exchanges signal potential supply pressure and increased token deposits signal aggregate intention to trade, both contributing to price declines. This research underscores on-chain data as a reliable economic signal and its impact on token valuations.
{"title":"Does what happens on-chain stays on-chain? The dynamics of blockchain token transactions and prices","authors":"Hugo Benedetti , Gabriel Rodríguez-Garnica","doi":"10.1016/j.jimonfin.2025.103408","DOIUrl":"10.1016/j.jimonfin.2025.103408","url":null,"abstract":"<div><div>Cryptoassets, particularly tokens, have garnered investor interest due to high returns, yet comprehensive studies examining on-chain transaction data to assess their intrinsic value remain limited. This study addresses this gap by introducing new on-chain transaction-based measures of token usage, crypto-exchange supply pressures, and aggregate transaction intention (trading versus usage/holding). Using over 180 million records of Ethereum-based-tokens’ transaction data, we categorize on-chain transactions as peer-to-peer usage or crypto-exchange-related. Our findings show that while increased token usage intensity, whether through peer-to-peer or exchange transactions, positively correlates with higher token returns, imbalances in exchange flows have the opposite effect. Specifically, increased token inflows to exchanges signal potential supply pressure and increased token deposits signal aggregate intention to trade, both contributing to price declines. This research underscores on-chain data as a reliable economic signal and its impact on token valuations.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"158 ","pages":"Article 103408"},"PeriodicalIF":3.3,"publicationDate":"2025-08-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144879939","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-08-13DOI: 10.1016/j.jimonfin.2025.103406
Tat-kei Lai , Travis Ng , Kwok Ping Tsang
Will foreign firms alter their dividend policies to cater to minority American investors’ tax preferences? Conceptually, in the context of foreign controlling shareholders making the tunneling-and-dividend decisions, foreign firms will not do so unless they value a broad American shareholder base. During a U.S. tax cut that increases American investors’ dividend desires only from qualified foreign corporations (QFCs), the dividend policies of those QFCs domiciled in low withholding tax jurisdictions exhibit a significantly stronger catering pattern than others. The conceptual framework and the empirical results jointly suggest that some foreign firms see the value of a broad American shareholder base.
{"title":"Do foreign firms cater to American investors’ dividend desires?","authors":"Tat-kei Lai , Travis Ng , Kwok Ping Tsang","doi":"10.1016/j.jimonfin.2025.103406","DOIUrl":"10.1016/j.jimonfin.2025.103406","url":null,"abstract":"<div><div>Will foreign firms alter their dividend policies to cater to minority American investors’ tax preferences? Conceptually, in the context of foreign controlling shareholders making the tunneling-and-dividend decisions, foreign firms will not do so unless they value a broad American shareholder base. During a U.S. tax cut that increases American investors’ dividend desires only from qualified foreign corporations (QFCs), the dividend policies of those QFCs domiciled in low withholding tax jurisdictions exhibit a significantly stronger catering pattern than others. The conceptual framework and the empirical results jointly suggest that some foreign firms see the value of a broad American shareholder base.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"158 ","pages":"Article 103406"},"PeriodicalIF":3.3,"publicationDate":"2025-08-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144907041","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-08-11DOI: 10.1016/j.jimonfin.2025.103407
Guglielmo Maria Caporale , Anamaria Diana Sova , Robert Sova
This paper applies the Seo and Shin (2016) method for estimating dynamic panels with endogenous threshold effects to obtain new, robust evidence on nonlinearities in the relationship between international financial integration (IFI) and economic growth. This approach is based on a first-differenced GMM estimator which allows both the threshold variable and the regressors to be endogenous. More specifically, the present study analyses yearly data for 40 European countries from 1996 to 2021, this European focus yielding novel insights into a region with a diverse economic landscape. The IFI–growth nexus is examined using various IFI measures and thresholds reflecting country-specific characteristics, and then the analysis is extended by comparing the impact of the 2007–2009 global financial crisis (GFC) and of the Covid-19 pandemic respectively on the relationship of interest. The results provide clear evidence of nonlinearities and suggest that the effects of financial integration on economic growth vary depending on factors such as the level of financial development, trade openness, institutional quality, political and economic uncertainty, initial income, and financial openness. Further, the 2007–2009 GFC appears to have had a more significant impact than the Covid-19 pandemic.
{"title":"INTERNATIONAL FINANCIAL INTEGRATION, ECONOMIC GROWTH AND THRESHOLD EFFECTS: SOME PANEL EVIDENCE FOR EUROPE","authors":"Guglielmo Maria Caporale , Anamaria Diana Sova , Robert Sova","doi":"10.1016/j.jimonfin.2025.103407","DOIUrl":"10.1016/j.jimonfin.2025.103407","url":null,"abstract":"<div><div>This paper applies the Seo and Shin (2016) method for estimating dynamic panels with endogenous threshold effects to obtain new, robust evidence on nonlinearities in the relationship between international financial integration (IFI) and economic growth. This approach is based on a first-differenced GMM estimator which allows both the threshold variable and the regressors to be endogenous. More specifically, the present study analyses yearly data for 40 European countries from 1996 to 2021, this European focus yielding novel insights into a region with a diverse economic landscape. The IFI–growth nexus is examined using various IFI measures and thresholds reflecting country-specific characteristics, and then the analysis is extended by comparing the impact of the 2007–2009 global financial crisis (GFC) and of the Covid-19 pandemic respectively on the relationship of interest. The results provide clear evidence of nonlinearities and suggest that the effects of financial integration on economic growth vary depending on factors such as the level of financial development, trade openness, institutional quality, political and economic uncertainty, initial income, and financial openness. Further, the 2007–2009 GFC appears to have had a more significant impact than the Covid-19 pandemic.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"158 ","pages":"Article 103407"},"PeriodicalIF":3.3,"publicationDate":"2025-08-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144842683","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-08-09DOI: 10.1016/j.jimonfin.2025.103404
Niranjan Sapkota
This study examines centralization risk in decentralized finance (DeFi), with a focus on the impact of wealth concentration on risk exposure across its key components. An analysis of the top 58,600 wallet addresses from 586 projects among the top 1,000 DeFi tokens reveals significant centralization, particularly within layer-3 tokens. Using value at risk and expected shortfall measures, the analysis reveals heightened risk for stablecoins and decentralized autonomous organization (DAO) tokens, while oracles, smart contracts, and governance tokens remain largely unaffected by wealth centralization. Further analysis with the standard GARCH model and time-varying parameter vector autoregression (TVP-VAR) scaled by the wealth concentration ratio (WCR) reveals that DAOs generate much of their risk internally. Stablecoins, serving as critical stabilizing agents within DeFi, absorb systemic risk without transmitting it back, unlike oracle tokens. This reliance on stablecoins during volatile conditions underscores their unique risk absorber role. The internal risk dynamics of DAOs, driven by the wealthiest stakeholders, amplify vulnerabilities within DeFi and extend their influence to Bitcoin. These findings challenge the traditional understanding of DeFi, showing how wealth concentration reshapes risk exposure beyond the DeFi ecosystem, with far-reaching consequences.
{"title":"DeFi: Mirage or reality? Unveiling wealth centralization risk in Decentralized Finance","authors":"Niranjan Sapkota","doi":"10.1016/j.jimonfin.2025.103404","DOIUrl":"10.1016/j.jimonfin.2025.103404","url":null,"abstract":"<div><div>This study examines centralization risk in decentralized finance (DeFi), with a focus on the impact of wealth concentration on risk exposure across its key components. An analysis of the top 58,600 wallet addresses from 586 projects among the top 1,000 DeFi tokens reveals significant centralization, particularly within layer-3 tokens. Using value at risk and expected shortfall measures, the analysis reveals heightened risk for stablecoins and decentralized autonomous organization (DAO) tokens, while oracles, smart contracts, and governance tokens remain largely unaffected by wealth centralization. Further analysis with the standard GARCH model and time-varying parameter vector autoregression (TVP-VAR) scaled by the wealth concentration ratio (WCR) reveals that DAOs generate much of their risk internally. Stablecoins, serving as critical stabilizing agents within DeFi, absorb systemic risk without transmitting it back, unlike oracle tokens. This reliance on stablecoins during volatile conditions underscores their unique risk absorber role. The internal risk dynamics of DAOs, driven by the wealthiest stakeholders, amplify vulnerabilities within DeFi and extend their influence to Bitcoin. These findings challenge the traditional understanding of DeFi, showing how wealth concentration reshapes risk exposure beyond the DeFi ecosystem, with far-reaching consequences.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"158 ","pages":"Article 103404"},"PeriodicalIF":3.3,"publicationDate":"2025-08-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144863873","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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