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Moral hazard in investment and endogenous risk taking

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  • Li, Rui

Abstract

I study a dynamic moral hazard model with endogenous risk taking, in which exposing the firm to greater risks could align the manager’s private benefit with that of the owner and thus enhance the incentive provision.

Suggested Citation

  • Li, Rui, 2017. "Moral hazard in investment and endogenous risk taking," Economics Letters, Elsevier, vol. 157(C), pages 112-115.
    • Handle: RePEc:eee:ecolet:v:157:y:2017:i:c:p:112-115
    DOI: 10.1016/j.econlet.2017.05.018
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    References listed on IDEAS

    as
    1. Obstfeld, Maurice, 1994. "Risk-Taking, Global Diversification, and Growth," American Economic Review, American Economic Association, vol. 84(5), pages 1310-1329, December.
    2. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    3. Hengjie Ai & Rui Li, 2012. "Moral hazard, investment, and firm dynamics," FRB Atlanta CQER Working Paper 2012-01, Federal Reserve Bank of Atlanta.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Dynamic contract; Endogenous risk taking; Moral hazard;
    All these keywords.

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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