Home -> Law Blog Directory -> Corporate Governance Blogs -> The Harvard Law School Corporate Governance Blog

OR PHONE (866) 635-1838 for Bankruptcy Help, (866) 635-6190 for Divorce,
(866) 635-2689 for Personal Injury or (866) 635-9402 for Criminal Defense

Find a Local Lawyer

Bankruptcy (866) 635-1838
Divorce (866) 635-6190
Personal Injury (866) 635-2689
Criminal Defense (866) 635-9402

Corporate Governance

: The Harvard Law School Corporate Governance Blog

The (Agency) Problem of Risk Incentives within Financial Institutions

By Harvard Law School Program on Corporate Governance

ADVERTISEMENTS

Editor?s Note: The following post comes to us from Sjoerd van Bekkum of the Finance Department at New York University and the Erasmus School of Economics at Erasmus University.

In the paper, Downside Risk and Agency Problems in the U.S. Financial Sector: Examining the Effect of Risk Incentives from 2007 to 2010, I consider risk incentives within financial institutions in the presence of two types of potential agency problems: the standard manager-shareholder agency problem and the risk-shifting problem between shareholders and society. First, I evaluate the effect of risk incentives on shareholder returns during the financial crisis. Next, I examine the relation between risk incentives and three downside risk statistics. Value-at-risk resembles a financial institution's tolerance to losses, expected shortfall resembles losses when the firm does poorly, and marginal expected shortfall resembles an institution's exposure to loss spillovers from its peers.

Click here to read the complete post...

Full post as published by The Harvard Law School Corporate Governance Blog on November 24, 2010 (boomark / email).