Abstract
This paper reviews and synthesizes corporate finance and financial intermediation literature by highlighting transaction costs as a determining factor in their evolution. It then introduces blockchain as a potentially powerful technology that can significantly reduce transaction costs and therefore affect the structure of corporations and financial intermediaries. Modern corporations strive to coordinate functions internally to minimize transaction costs. And financial intermediaries attempt to resolve the information asymmetry problem among transacting parties. Over time, however, corporations and financial intermediation have been settled with the remaining incentive problems and their associated costs. For example, some financial intermediaries have committed fraud by timing their trades ahead of their customers, others by misquoting interest rates, and a few by fleecing customers by issuing unwanted credit cards. Regulators protecting customers often appear to be one step behind in preempting these intermediaries from wrongdoing. After introducing blockchain technology and explaining how it works, this paper examines the application of blockchain in real-estate finance, demonstrating how it can reduce or eliminate the role of multiple intermediaries in executing transactions.
Published Version
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