Resource title

Limited liability and the risk-incentive relationship

Resource image

image for OpenScout resource :: Limited liability and the risk-incentive relationship

Resource description

Several empirical findings have challenged the traditional view on the trade-off between risk and incentives. By combining risk aversion and limited liability in a standard principal-agent model the empirical puzzle ont hepositive relationship between risk and incentives can be explained. Increasing risk leads to a less informative performance signal. Under limited liability, the principal may optimally react by increasing the weight on the signal and, hence, choosing higher-powered incentives.

Resource author

Jörg Budde, Matthias Kräkel

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/27167

Resource license

Adapt according to the presented license agreement and reference the original author.