kaal:claim:1908473-014

The incentive effects of corporate governance controls may not operate in systemically important financial institutions, because managers and owners who anticipate a bailout commitment adjust their risk preferences upward.

the incentives originating from corporate governance controls may not work in SIFIs. SIFIs are often considered too big to fail and may be bailed out.108 If that is the case, SIFI principals-managers-owners may anticipate a bailout commitment and adjust their risk preferences upwards.

Wulf A. Kaal, Christoph Henkel, Contingent Capital with Sequential Triggers (2011), II.B. Limitations and Open Issues, p. 23
https://ssrn.com/abstract=1908473 · source PDF

Wulf A. Kaal, Christoph Henkel, Contingent Capital with Sequential Triggers (2011). SSRN: https://ssrn.com/abstract=1908473

• Applies to institutions considered too big to fail

failuresupport: arguedfailure: anticipated-bailout-risk-shiftfamily: moral-hazard-and-bailout-expectationrisk-and-incentivessystemic-riskgovernance-designcorporate-governance

• restated_by kaal:claim:1998455-018 Regular corporate governance controls may not work in systemically important financial institutions, because t...
• extended_by kaal:claim:2957645-022 The threat of dilution of stock holdings, combined with the threat of loss upon conversion, could help reduce ...

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