Risk-Taking Behavior with Limited Liability and Risk Aversion
Risk-Taking Behavior with Limited Liability and Risk Aversion

Author: Christian Gollier

Publisher:

Published: 2008

Total Pages:

ISBN-13:

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We consider in this paper the problem of a risk-averse firm with limited liability. The firm has to select the size of its investment in a risky project. We show that the optimal exposure to risk of the limited liability firm is always larger than under full liability. Moreover, there exists a positive lower bound on the value of the firm below which the firm will quot;bet for resurrection,quot; i.e. it will invest the largest positive amount in the risky project. We also consider the standard portfolio problem with more than one risky asset. We show that limited liability may induce the firm to specialize in no Mean-Variance efficient assets.

The Psychology of Risk Taking Behavior
The Psychology of Risk Taking Behavior

Author: R.M. Trimpop

Publisher: Elsevier

Published: 1994-04-28

Total Pages: 413

ISBN-13: 0080867618

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This book aims to help the reader to understand what motivates people to engage in risk taking behavior, such as participating in traffic, sports, financial investments, or courtship. The consequences of risk taking may be positive, or result in accidents and injuries, especially in traffic. The wealth of studies and theories (about 1000 references) is used to offer a cohesive, holistic view of risk motivation. The risk motivation theory is a dynamic state-trait model incorporating physiological, emotional and cognitive components of risk perception, processing and planning. If a deficit exists between desired and perceived risk, risk compensation behavior results. A feedback loop provides new information for the next perception-motivation-behavior process. Assumptions were tested and support was found with 120 subjects in a longitudinal study. The concepts and findings are discussed in relation to psychological theories and their meaning for our daily lives.

Risk-taking, Limited Liability, and the Banking Crisis
Risk-taking, Limited Liability, and the Banking Crisis

Author: Hans-Werner Sinn

Publisher:

Published: 2009

Total Pages: 208

ISBN-13:

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"The volume includes theoretical articles on banks' liability restrictions, on the possible causes of the banking crisis and economic-policy recommendations on banking regulation by Hans-Werner Sinn in the past three decades."--Publisher's website.

Risk-taking Under Limited Liability
Risk-taking Under Limited Liability

Author: Ciril Bosch-Rosa

Publisher:

Published: 2019

Total Pages:

ISBN-13:

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This paper investigates whether limited liability affects risk-taking through motivated beliefs. To do so, we run a within-subject experiment in which subjects invest in a risky asset under full or limited liability. In both cases, before the investment is made, subjects observe a noisy signal that indicates whether the investment will succeed or fail. They then state the likelihood of the investment's success and decide how much to invest. Our results show a strong effect of limited liability on both the investment decision and the formation of motivated beliefs. Compared to subjects under full liability, subjects under limited liability not only invest larger amounts but are also significantly more optimistic about the success of their investments. Finally, we show that more than one-third of the increase in investment under limited liability can be explained through motivated beliefs.

Taking Risks
Taking Risks

Author: Kenneth R. Maccrimmon

Publisher: Simon and Schuster

Published: 1988-09-19

Total Pages: 404

ISBN-13: 0029195632

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Offers tests designed to measure one's willingness to take risks, describes characteristics associated with this quality, and discusses the importance of risk-taking in management and investment situations.

Risk-Taking Behavior
Risk-Taking Behavior

Author: Jacques Frank Yates

Publisher:

Published: 1992-02-18

Total Pages: 380

ISBN-13:

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Offering contributions from the fields of psychology, economics, medicine and business, this study examines the psychological foundations and ramifications of risk-taking behaviour. It provides recommendations on the encouragement of appropriate risk-taking in a business setting.

Limited Liability, Moral Hazard, and Risk Taking
Limited Liability, Moral Hazard, and Risk Taking

Author: Sascha Füllbrunn

Publisher:

Published: 2013

Total Pages: 0

ISBN-13:

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We model the safety net problem as a social dilemma game involving moral hazard, risk taking, and limited liability. The safety net game is compared to both an individual decision task involving full liability and the deterministic public goods game. We report experimental data to show that limited liability leads to higher risk taking in comparison to full liability; nevertheless, the difference is much smaller than predicted by theory. In the safety net game, subjects behave as if socially responsible for the losses they impose on the group. With repetition, nevertheless, a gradual emergence of the moral hazard problem arises.

Risk Profiling and Tolerance: Insights for the Private Wealth Manager
Risk Profiling and Tolerance: Insights for the Private Wealth Manager

Author: Joachim Klement

Publisher: CFA Institute Research Foundation

Published: 2018-05-01

Total Pages: 150

ISBN-13: 1944960473

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If risk aversion and willingness to take on risk are driven by emotions and we as humans are bad at correctly identifying them, the finance profession has a serious challenge at hand—how to reliably identify the individual risk profile of a retail investor or high-net-worth individual. In this series of CFA Institute Research Foundation briefs, we have asked academics and practitioners to summarize the current state of knowledge about risk profiling in different key areas.