Abstract

Despite criticism in the wake of the GFC, history shows that theory and curricula adapt to rectify any disconnects between theory, curricula, and practice. Finance theory unquestionably has antecedents in economics, accounting, legal theory, and psychology. Some theoretical developments—including the moral hazard consequences of limited liability—have yet to filter through to many texts and curricula, which also omit explanations of uncertainty; incomplete and optimal contracting; contagion; and behavioural finance. Student learning outcomes could be enhanced if universities, perhaps in a final year, cross-disciplinary “capstone” course, empowered students to understand the financial documentation evidencing sophisticated transactions; map relevant cash flows and wealth transfers; and recognise Ponzi schemes, the ethics of stakeholder wealth transfers, the conditions for contagion, and incentives for adverse selection and moral hazard in practice