Arbeitspapier
Limited Liability and the Risk-Incentive Relationship
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 empiri- cal puzzle on the positive 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 in- creasing the weight on the signal and; hence; choosing higher-powered incentives.
- Language
-
Englisch
- Bibliographic citation
-
Series: Bonn Econ Discussion Papers ; No. 6/2008
- Classification
-
Wirtschaft
Asymmetric and Private Information; Mechanism Design
Economics of Contract: Theory
- Subject
-
moral hazard
limited liability
risk-incentive relationship
Moral Hazard
Beschränkte Haftung
Leistungsanreiz
Risikoaversion
Agency Theory
Theorie
- Event
-
Geistige Schöpfung
- (who)
-
Budde, Jörg
Kräkel, Matthias
- Event
-
Veröffentlichung
- (who)
-
University of Bonn, Bonn Graduate School of Economics (BGSE)
- (where)
-
Bonn
- (when)
-
2008
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Budde, Jörg
- Kräkel, Matthias
- University of Bonn, Bonn Graduate School of Economics (BGSE)
Time of origin
- 2008