Repeated Moral Hazard, Limited Liability, and Renegotiation PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download Repeated Moral Hazard, Limited Liability, and Renegotiation PDF full book. Access full book title Repeated Moral Hazard, Limited Liability, and Renegotiation by Susanne Ohlendorf. Download full books in PDF and EPUB format.
Author: Susanne Ohlendorf
Publisher:
ISBN:
Category :
Languages : en
Pages : 26
Get Book Here
Book Description
Author: Susanne Ohlendorf
Publisher:
ISBN:
Category :
Languages : en
Pages : 26
Get Book Here
Book Description
Author: Marie-Laure Djelic
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
Get Book Here
Book Description
The principle of limited liability is one of the defining characteristics of modern corporate capitalism. It is also, we argue in this paper, a powerful structural source of moral hazard. Engaging in a double conceptual genealogy, we investigate how the concepts of moral hazard and limited liability were created and diffused over time. We highlight two very similar but parallel paths of emergence, moral contestation and eventual institutionalization, and outline how the two notions have become connected through time, showing clear elective affinities between both concepts and their respective evolution. Going one step further, we suggest that both concepts have come to be connected through time. In the context of contemporary capitalism, limited liability has to be understood, we argue, as a powerful structural source of moral hazard. In conclusion, we propose that this structural link between limited liability and moral hazard is an important explanatory factor of the recent financial crisis and a seemingly intractable characteristic of modern corporate capitalism.
Author: Rohan Pitchford
Publisher:
ISBN:
Category :
Languages : en
Pages : 18
Get Book Here
Book Description
Author: Anindya Banerjee
Publisher:
ISBN:
Category : Credit control
Languages : en
Pages : 48
Get Book Here
Book Description
Author: Susanne Ohlendorf
Publisher:
ISBN:
Category : Limited liability
Languages : en
Pages : 0
Get Book Here
Book Description
Author: Jürgen Bierbaum
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
This paper studies the incentives that arise in a two-period agency relationship with moral hazard when agents are subject to limited liability. Since the existence of limited liability creates rent the principal can motivate an agent by credibly threatening him to be fired. It is shown that a combination of a two-period contract, where the agent is fired after period one in case of poor performance and retained otherwise, and a one-period contract optimally implements high effort. In particular, this combination is strictly better than a two-period contract, where the agent is retained in period two for sure. Moreover, there is a combination of one-period contracts that is equivalent to the optimal combination. While the second-period contract is the same as the optimal contract in the static model, the first-period contract pays a lower bonus in case of success. In an extension of the model "learning by doing" is considered. It turns out that the ranking of contracts is reversed if the increase in revenues due to "learning by doing" is sufficiently strong. In addition, a commitment problem arises which makes short-term contracting strictly worse than long-term contracting.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
Author: Steven M. Matthews
Publisher:
ISBN:
Category :
Languages : en
Pages : 21
Get Book Here
Book Description
Author: Anindya Banerjee
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 36
Get Book Here
Book Description
Author: Wenbin Wang
Publisher:
ISBN:
Category :
Languages : en
Pages : 43
Get Book Here
Book Description
This paper studies the optimal contract for a risk-neutral agency with limited liability. We introduce a novel formulation of the model, in which the contract design problem reduces to a problem of constructing the distribution function of a random variable. This formulation directly balances the principal's tradeoff between incentivizing the agent to exert proper effort and minimizing the cost of the agent's compensation. We show that the optimal contract may involve one or two tiers of performance-based bonuses. We obtain new sufficient conditions for the optimality of bonus contracts and provide new insights into the choice of contract parameters.
