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This paper develops a model of banking to study the risk-taking consequences of contingent capital (CC). It begins with the observation that partial conversion of CC provides its owners with a portfolio of equity and debt. Since the former (latter) asset typically induces a preference for risk...
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for stock corporations. Recent empirical evidence, moreover, suggests that bank shareholders pushed for greater risk …-taking and not managers. This contrast with public view that the bank managers are pushed by aggressive remunerations schemes to …
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management. Politicians may also be less educated and experienced to fulfil their role as monitor of bank managers. This …, suggests that shareholders pushed for greater risk-taking and not managers. This contrast with public view that the bank …
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