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Risking Other People's Money: Gambling, Limited Liability, and Optimal Incentives - Beroc
Логотип beroc

События

Risking Other People’s Money: Gambling, Limited Liability, and Optimal Incentives

Motivation
Financial meltdown 2008
• Ex ante unlikely outcome
• Ex post AIG, Lehman, Citi, Merrill Lynch, etc. suffered high losses
• Losses were caused by divisions trading highly risky securities
• Investors were unable to either monitor or understand actions taken by managers
Managers enjoy limited liability and their compensation is performance based