# kaal:claim:1998455-018

**Claim.** Regular corporate governance controls may not work in systemically important financial institutions, because those institutions are considered too big to fail and their leaders, anticipating a bailout commitment, are incentivized to shift their risk preferences upwards.

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

**Holds when.**

- where the institution is treated as too big to fail and a bailout is anticipated

**Source quote.**

> the regular corporate governance controls may not work in SIFIs. SIFIs are often considered too big to fail and may be bailed out. If that is the case, SIFI leaders may anticipate a bail-out com- mitment and may be incentivized to shift their risk preferences upwards.

**From.** Wulf A. Kaal, *Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance* (2012), IV.A. Adverse Effects, page 34

**Cite as.** Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012). SSRN: https://ssrn.com/abstract=1998455

**Verify.** sha256 of source PDF `1c16ff10a284469ba15fb7ba5523449b917388ee692d9b394f9e8c094544e32c` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202012%20-%20Initial%20Reflections%20on%20the%20Possible%20Application%20of%20Contingent%20Capital%20in%20Corporate%20Governance.pdf

**Failure mode.** governance-controls-ineffective-in-sifis  (family: moral-hazard-and-bailout-expectation)

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

**Keywords.** corporate-governance, too-big-to-fail, risk-preferences, sifis, failure-modes

**Related claims.**

- restates: https://wulfkaal.github.io/claims/1908473-014

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