Investment and Financing Decisions Under Moral Hazard
| Author | : Richard Carleton Green |
| Publisher | : |
| Total Pages | : 486 |
| Release | : 1982 |
| Genre | : Corporations |
| ISBN | : |
Investment And Financing Decisions Under Moral Hazard
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Moral Hazard
| Author | : Juan Flores Zendejas |
| Publisher | : Routledge |
| Total Pages | : 167 |
| Release | : 2021-12-30 |
| Genre | : Business & Economics |
| ISBN | : 1000515028 |
Moral Hazard is a core concept in economics. In a nutshell, moral hazard reflects the reduced incentive to protect against risk where an entity is (or believes it will be) protected from its consequences, whether through an insurance arrangement or an implicit or explicit guarantee system. It is fundamentally driven by information asymmetry, arises in all sectors of the economy, including banking, medical insurance, financial insurance, and governmental support, undermines the stability of our economic systems and has burdened taxpayers in all developed countries, resulting in significant costs to the community. Despite the seriousness and pervasiveness of moral hazard, policymakers and scholars have failed to address this issue. This book fills this gap. It covers 200 years of moral hazard: from its origins in the 19th century to the bailouts announced in the aftermath of the COVID-19 outbreak. The book is divided into three parts. Part I deals with the ethics and other fundamental issues connected to moral hazard. Part II provides historical and empirical evidence on moral hazard in international finance. It examines in turn the role of the export credit industry, the international lender of last resort, and the IMF. Finally, Part III examines specific sectors such as automobile, banking, and the US industry at large. This is the first book to provide an interdisciplinary analysis of moral hazard and explain why addressing this issue has become crucial today. As such, it will attract interest from scholars across different fields, including economists, political scientists and lawyers.
Bank Bailouts and Moral Hazard? Evidence from Banks' Investment and Financing Decisions
| Author | : Yunjeen Kim |
| Publisher | : |
| Total Pages | : 55 |
| Release | : 2017 |
| Genre | : |
| ISBN | : |
The goal of this paper is to estimate a dynamic model of a bank to explain how bank bailouts exacerbate moral hazard. In the model, a bank makes an endogenous choice of the risks of its investments and can finance these investments by deposits and risky debt. I estimate nine model parameters that characterize a bank's behavior. For the full sample of U.S. banks, I estimate the expected bailout probability, conditional on bankruptcy, to be 52%. The estimated conditional bailout probabilities for small and large banks are 36% and 76%, respectively. The model predicts that rescue funding constitutes 4.2% of total assets, which is very close to the actual capital injection, 4.4% of total assets, made by the U.S. government under the 2008 Troubled Asset Relief Program (TARP). The simulation results show that a bank with a higher bailout belief takes more risks, especially when it is very close to bankruptcy.
Moral Hazard
| Author | : Fouad Sabry |
| Publisher | : One Billion Knowledgeable |
| Total Pages | : 579 |
| Release | : 2024-02-03 |
| Genre | : Business & Economics |
| ISBN | : |
What is Moral Hazard The term "moral hazard" refers to a circumstance that occurs in the field of economics and describes a situation in which an economic actor has an incentive to expand its exposure to risk because it does not face the full costs of that risk. As an illustration, when a company is insured, it may be willing to take on additional risk since it is aware that its insurance will cover the costs connected with the risk. It is possible for a moral hazard to take place when, after a financial transaction has taken place, the actions of the party that is taking the risk change in a way that is detrimental to the party that is suffering the costs. How you will benefit (I) Insights, and validations about the following topics: Chapter 1: Moral hazard Chapter 2: Economic bubble Chapter 3: Debt Chapter 4: Contract theory Chapter 5: Adverse selection Chapter 6: Information asymmetry Chapter 7: Savings and loan crisis Chapter 8: Asset-backed security Chapter 9: Mortgage loan Chapter 10: Subprime mortgage crisis Chapter 11: Flight-to-quality Chapter 12: Subordinated debt Chapter 13: Subprime crisis impact timeline Chapter 14: Credit crunch Chapter 15: Subprime crisis background information Chapter 16: Interbank lending market Chapter 17: Government policies and the subprime mortgage crisis Chapter 18: Subprime mortgage crisis solutions debate Chapter 19: Securitization Chapter 20: Financial fragility Chapter 21: 2007-2008 financial crisis (II) Answering the public top questions about moral hazard. (III) Real world examples for the usage of moral hazard in many fields. Who this book is for Professionals, undergraduate and graduate students, enthusiasts, hobbyists, and those who want to go beyond basic knowledge or information for any kind of Moral Hazard.
The Theory of Entrepreneurship
| Author | : Chandra S. Mishra |
| Publisher | : Springer |
| Total Pages | : 520 |
| Release | : 2014-12-04 |
| Genre | : Business & Economics |
| ISBN | : 1137371463 |
The Theory of Entrepreneurship examines the interiors of the entrepreneurial value creation process, and offers a new unified and comprehensive theory to afford empirical investigations as well as delineate a broader view of the entrepreneurial contextual milieu.
Moral Hazard in Health Insurance
| Author | : Amy Finkelstein |
| Publisher | : Columbia University Press |
| Total Pages | : 161 |
| Release | : 2014-12-02 |
| Genre | : Medical |
| ISBN | : 0231538685 |
Addressing the challenge of covering heath care expenses—while minimizing economic risks. Moral hazard—the tendency to change behavior when the cost of that behavior will be borne by others—is a particularly tricky question when considering health care. Kenneth J. Arrow’s seminal 1963 paper on this topic (included in this volume) was one of the first to explore the implication of moral hazard for health care, and Amy Finkelstein—recognized as one of the world’s foremost experts on the topic—here examines this issue in the context of contemporary American health care policy. Drawing on research from both the original RAND Health Insurance Experiment and her own research, including a 2008 Health Insurance Experiment in Oregon, Finkelstein presents compelling evidence that health insurance does indeed affect medical spending and encourages policy solutions that acknowledge and account for this. The volume also features commentaries and insights from other renowned economists, including an introduction by Joseph P. Newhouse that provides context for the discussion, a commentary from Jonathan Gruber that considers provider-side moral hazard, and reflections from Joseph E. Stiglitz and Kenneth J. Arrow. “Reads like a fireside chat among a group of distinguished, articulate health economists.” —Choice
Firms' Investment and Finance Decisions
| Author | : Paul Butzen |
| Publisher | : Edward Elgar Publishing |
| Total Pages | : 354 |
| Release | : 2003-01-01 |
| Genre | : Business & Economics |
| ISBN | : 9781781956335 |
This book provides coherent theoretical and empirical analysis of firms’ investment and financing decisions. It assesses the role of uncertainty, financial imperfections, corporate governance and taxation. Evidence is obtained using several unique and high quality microeconomic data-sets, which explore features seldom addressed.
Moral Hazard by Inside Investors in the Context of Venture Financing
| Author | : Jochen Bigus |
| Publisher | : |
| Total Pages | : 22 |
| Release | : 2002 |
| Genre | : |
| ISBN | : |
We look at moral hazard by an insider investor in the context of venture financing The inside investor has experienced the entrepreneur's quality in a previous stage. An outside investor cannot assess the quality. Thus, generally, an outside investor offers financial terms reflecting the average entrepreneurial quality. If the entrepreneur is a good one the inside investor may have an incentive to appropriate rents due to his information monopoly by demanding a higher share on the venture's return before financing the next stage. If it is more costly for the entrepreneur to switch to an outside investor, she sticks to the inside investor, though. However, she may not choose the efficient level of effort or specific investments, rather she underinvests. This problem of expropriation depends on the information structure and may be mitigated when the parties ex ante fix the financial terms of future capital infusions conditionally on the performance of previous stages. These provisions are quite common. So far, the literature considered them as a device to mitigate moral hazard by entrepreneurs. But they can also mitigate the inside investor's incentive to negotiate opportunistically. The syndication of venture capital investments may mitigate the moral hazard problem, too, since co-investors are likely to be better informed than outside investors. Debt financing or mixed financing may be more favorable than equity financing since legal boundaries on interest rates limit the extent to which an inside investor could hold up an entrepreneur.
Investor Decision-Making and the Role of the Financial Advisor
| Author | : Caterina Cruciani |
| Publisher | : Springer |
| Total Pages | : 170 |
| Release | : 2017-11-13 |
| Genre | : Business & Economics |
| ISBN | : 3319682342 |
This book looks at financial advisory from a behavioural perspective, and focuses on how the nature of the relationship between advisors and clients may affect the ability of the advisor to perform its functions. Broken into three key parts, the book looks at the client, the advisor, and the relationship between the two. Chapters review relevant theories of decision-making under risk to understand the nature of clients’ decisions. The literature on advisors’ functions and the normative landscape regulating financial advisory are also addressed. Finally, this book reviews how behavioural finance has traditionally addressed portfolio selection and explains how trust can be seen as a viable avenue to maximize advisors’ effectiveness and pursue clients’ needs. This book will be of interest to both behavioural finance scholars and practitioners interested in understanding what the future of financial advisory may have in stock.
Too Big to Fail
| Author | : Gary H. Stern |
| Publisher | : Rowman & Littlefield |
| Total Pages | : 247 |
| Release | : 2004-02-29 |
| Genre | : Business & Economics |
| ISBN | : 0815796366 |
The potential failure of a large bank presents vexing questions for policymakers. It poses significant risks to other financial institutions, to the financial system as a whole, and possibly to the economic and social order. Because of such fears, policymakers in many countries—developed and less developed, democratic and autocratic—respond by protecting bank creditors from all or some of the losses they otherwise would face. Failing banks are labeled "too big to fail" (or TBTF). This important new book examines the issues surrounding TBTF, explaining why it is a problem and discussing ways of dealing with it more effectively. Gary Stern and Ron Feldman, officers with the Federal Reserve, warn that not enough has been done to reduce creditors' expectations of TBTF protection. Many of the existing pledges and policies meant to convince creditors that they will bear market losses when large banks fail are not credible, resulting in significant net costs to the economy. The authors recommend that policymakers enact a series of reforms to reduce expectations of bailouts when large banks fail.
