# kaal:claim:1558614-013

**Claim.** Limited liability lets managers and shareholders capture most of the benefits of excessive risk taking while not bearing all of its costs, which is one explanation for why bankers take excessive risk.

**Type.** mechanism  **Support.** argued

**Holds when.**

- corporation protected by limited liability
- corporation may lack assets sufficient to pay creditors

**Source quote.**

> Accordingly, both managers and shareholders of a corporation enjoy most of the benefits of excessive 62 risk taking but do not bear all of the costs.

**From.** Painter and Kaal, *Initial Reflections on an Evolving Standard Constraints on Risk Taking by Directors and Officers in* (2010), III. Cultural Components of Risk Taking and Controlling Risk, page 19

**Cite as.** Painter and Kaal, Initial Reflections on an Evolving Standard Constraints on Risk Taking by Directors and Officers in (2010). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1558614

**Verify.** sha256 of source PDF `e898211630f4116879329d6de8397523dca5b066864147421aa5cbc7429dc83b` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Painter%20and%20Kaal%20-%202010%20-%20Initial%20Reflections%20on%20an%20Evolving%20Standard%20Constraints%20on%20Risk%20Taking%20by%20Directors%20and%20Officers%20in.pdf

**Topics.** law-and-legal-systems, ai-and-agents, risk-and-incentives

**Keywords.** limited-liability, externalized-cost, incentive-misalignment, excessive-risk

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