Limited Liability and the Trade-off between Risk and Incentives
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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 empirical 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...
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تاریخ انتشار 2007