Articles

Financial Risk Management: When Does Independence Fail?

A. LANDIER, D. Sraer, D. THESMAR

American Economic Review

mai 2009, vol. 99, n°2, pp.454-458

Départements : Finance, GREGHEC (CNRS)

http://www.jstor.org/stable/25592440


The article discusses financial risk management and when a risk management function design could fail. A model of risk management is proposed by the authors which includes the role of the trader while giving a level of independence for the risk manager. This model is used to examine risk management failures. The research focuses on organization design rather than finance literature. The authors found that their model allows an increase in the convexity of trader compensation. It was also found that an increase in the risk of assets traded reduces the impact of risk management independence.*RISK management*FINANCIAL services industry*ECONOMIC models*RISK exposure*RISK managers*ORGANIZATIONAL behavior*MANAGEMENT science*ECONOMICS literature*INCENTIVES in industry*ECONOMETRICS*FINANCIAL institutions -- ManagementFINANCE literature


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