Synthetic unlimited liability

Stephen Matteo Miller

Economics Letters, 2024, vol. 241, issue C

Abstract: A synthetic analog of unlimited liability exists to curb executive risk-taking. Total shares liability multiplies an executive's fraction of shares held by the costs of restoring the corporation's solvency. I illustrate using Spring 2023 bank failures. Total options liability comes from executives selling a put for each call received.

Keywords: Bailouts; Bank failures; Contingent liability; Executive compensation; Unlimited liability (search for similar items in EconPapers)
JEL-codes: G01 H81 M12 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:241:y:2024:i:c:s0165176524003057

DOI: 10.1016/j.econlet.2024.111821

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