# kaal:claim:1908473-014

**Claim.** 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.

**Type.** failure  **Support.** argued

**Holds when.**

- Applies to institutions considered too big to fail

**Source quote.**

> 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.

**From.** Wulf A. Kaal, Christoph Henkel, *Contingent Capital with Sequential Triggers* (2011), II.B. Limitations and Open Issues, page 23

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

**Verify.** sha256 of source PDF `9d578dac663357529edd1f6453fcfe69bdc59ac882408d9edfde5a4c2916befa` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20and%20Henkel%20-%202011%20-%20Contingent%20Capital%20with%20Sequential%20Triggers.pdf

**Failure mode.** anticipated-bailout-risk-shift  (family: moral-hazard-and-bailout-expectation)

**Topics.** risk-and-incentives, systemic-risk, governance-design, corporate-governance

**Keywords.** moral-hazard, too-big-to-fail, risk-taking, corporate-governance

**Related claims.**

- restated_by: https://wulfkaal.github.io/claims/1998455-018
- extended_by: https://wulfkaal.github.io/claims/2957645-022

**Canonical form.** This markdown file is the canonical hashed representation of the claim. Its sha256 is the content hash used for attestation.