# kaal:claim:2097160-020

**Claim.** Ordinary SIFI creditors have suboptimal incentives to monitor management because they implicitly expect that the government will provide bailout funding given the nature of the entity.

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

**Holds when.**

- systemically important financial institutions carrying implicit government guarantees

**Source quote.**

> Because of an implicit expectation that the government will provide bailout funding due to the nature of the entity, ordinary SIFI creditors may have suboptimal incentives to monitor the performance of management.177

**From.** Wulf A. Kaal, *Contingent Capital in Executive Compensation* (2012), V.B.2 The Benefits of Early Triggers, page 43

**Cite as.** Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160

**Verify.** sha256 of source PDF `1e1f8aa246bce19f4658dbceb455c7c2a272aa5d63a9e9bdaa46a3a5a87680fc` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202012%20-%20Contingent%20Capital%20in%20Executive%20Compensation.pdf

**Failure mode.** Bailout expectation suppresses creditor monitoring  (family: moral-hazard-and-bailout-expectation)

**Topics.** compliance, risk-and-incentives, systemic-risk

**Keywords.** creditor-monitoring, moral-hazard, implicit-guarantee, too-big-to-fail

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