kaal:claim:2061166-022

Because conversion carries a threat of loss and implicit dilution of stock holdings, contingent capital reduces shareholders' incentive to push management toward higher risk in pursuit of higher returns.

Moreover, given the threat of loss due to conversion and the implicit dilution of stock holdings, contingent capital has the potential to reduce incentives for shareholders to encourage management to take higher risks for higher returns.

Christoph K. Henkel, Wulf A. Kaal, Contingent Capital in European Union Bank Restructuring (2012), IV. CONTINGENT CAPITAL IN BANK RESTRUCTURING, p. 53
https://ssrn.com/abstract=2061166 · source PDF

Christoph K. Henkel, Wulf A. Kaal, Contingent Capital in European Union Bank Restructuring (2012). SSRN: https://ssrn.com/abstract=2061166

• conversion terms that dilute existing equity holders

mechanismsupport: arguedcontingent-capitalrisk-and-incentivescorporate-governance

• restates kaal:claim:1908473-018 The threat of loss on conversion and the implicit dilution of existing stock holdings reduce shareholders' inc...
• restates kaal:claim:1998455-010 The threat of dilution of stock holdings, combined with the threat of loss on conversion, reduces the pressure...
• restated_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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