CONTROL RIGHTS (AND WRONGS)
Article first published online: 7 JUN 2012
© 2012 The Author. Economic Affairs © 2012 Institute of Economic Affairs. Published by Blackwell Publishing, Oxford
Volume 32, Issue 2, pages 47–58, June 2012
How to Cite
Haldane, A. G. (2012), CONTROL RIGHTS (AND WRONGS). Economic Affairs, 32: 47–58. doi: 10.1111/j.1468-0270.2012.02155.x
- Issue published online: 7 JUN 2012
- Article first published online: 7 JUN 2012
- risk management;
- capital and ownership structure;
- value of firms;
- corporate governance;
- payout policy
Disclaimer: The views expressed are not necessarily those of the Bank of England or the Financial Policy Committee.
In the 2011 Wincott Lecture, the author sets out a number of structural factors that have led banks to take on too much risk. The combination of limited liability for equity holders, tax biases that favoured debt over equity, the likelihood that banks would not be allowed to fail, and performance targets linked to short-term equity returns meant that neither debt nor equity holders had an incentive to constrain bank risk taking. A number of solutions are offered which would better align these incentives with the public good.