A History of the Term “Moral Hazard”

Rowell, David; Connelly, Luke B.

doi:10.1111/j.1539-6975.2011.01448.x

Cited by 109 publications

(48 citation statements)

References 40 publications

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“…Moral hazard is seen as a manifestation of asymmetric information (Arrow 1971;Pauly 1974;Rowell and Connelly 2012) and it arises in a principal/agent problem. In companies with negative equity the power to make decisions continues to lie with shareholders or with a third party to whom the shareholders have delegated the management of their interests, even though the company has lost all its net worth.…”

Section: Theoretical Foundationsmentioning

confidence: 99%

Negative equity companies in Europe: theory and evidence

Urionabarrenetxea

San-José

Retolaza³

2016

Business: Theory and Practice

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Businesses in technical bankruptcy are part of the European context, many of them in such financial distress that they have lost all their equity and a very high percentage of them have even incurred negative equity. There is a very little literature analysing these companies; moreover, they are considered as out of the ordinary because they do not fit into conventional theories of business, and are removed from most samples. They are largely neglected. The research questions posed here are a step towards remedying this: "What are the scale and the economic impact of negative equity companies in terms of risk transference?", "Does this problem differ from one European country to another?", "Is it an effect of the crisis?".Using the Bureau Van Dijk's Amadeus database, we find that nearly 20% of companies have negative equity. Such companies handle more than one billion Euros, i.e. nearly 10% of European GDP. So the results suggest that negative equity companies have a high weight in Europe and, based on the country cluster studied, it seems that neither culture nor geographical area is determinant in explaining their distribution across countries. Nor is the crisis a determinant in explaining their existence, so the problem is not cyclical but structural.These findings have potentially important implications in encouraging European decision makers to factor such companies into their policies and to include them in economic models.

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Section: Theoretical Foundationsmentioning

confidence: 99%

Negative equity companies in Europe: theory and evidence

Urionabarrenetxea

San-José

Retolaza³

2016

Business: Theory and Practice

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“…Due to different core knowledge and capabilities, together with the information asymmetry in the course of project implementation, the owner and contractor may both exhibit moral hazard behaviors [20]. The behaviors of the owner and contractor heavily rely on the signed contractual terms, while moral hazard behaviors may occur where the actions of one party may change to the detriment of another after an undesirable behavior has taken place [21][22][23]. Therefore, cooperative strategies are being increasingly embraced by both the owner and contractor, in order to avoid such moral hazard behaviors [24].…”

Section: Introductionmentioning

confidence: 99%

Incentive Model Based on Cooperative Relationship in Sustainable Construction Projects

Zuo

Zhao

2017

Sustainability

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Considering the cooperative relationship between owners and contractors in sustainable construction projects, as well as the synergistic effects created by cooperative behaviors, a cooperative incentive model was developed using game theory. The model was formulated and analyzed under both non-moral hazard and moral hazard situations. Then, a numerical simulation and example were proposed to verify the conclusions derived from the model. The results showed that the synergistic effect increases the input intensity of one party's resource transfer into the increase of marginal utility of the other party, thus the owner and contractor are willing to enhance their levels of effort. One party's optimal benefit allocation coefficient is positively affected by its own output efficiency, and negatively affected by the other party's output efficiency. The effort level and expected benefits of the owner and contractor can be improved by enhancing the cooperative relationship between the two parties, as well as enhancing the net benefits of a sustainable construction project. The synergistic effect cannot lower the negative effect of moral hazard behaviors during the implementation of sustainable construction projects. Conversely, the higher levels of the cooperative relationship, the wider the gaps amongst the optimal values under both non-moral hazard and moral hazard situations for the levels of effort, expected benefits and net project benefits. Since few studies to date have emphasized the effects of cooperative relationship on sustainable construction projects, this study constructed a game-based incentive model to bridge the gaps. This study contributes significant theoretical and practical insights into the management of cooperation amongst stakeholders, and into the enhancement of the overall benefits of sustainable construction projects.

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“…Hay, al menos, dos respuestas posibles: porque ignoran este hecho o porque, aun conociendo las consecuencias, prefieren no incurrir en costos para evitarlas ya que no serán los principales perjudicados por ellas. Eso es lo que se denomina un fenómeno de riesgo moral (Xepapadeas, 1991;Rowell y Connelly, 2012).…”

Section: La Dirección Nacional De Recursos Naturales Renovables (Renaunclassified

¿Qué capacidades requieren las nuevas políticas de innovación y cambio estructural en Uruguay?

Bianchi

Pittaluga

Fuentes

2016

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte.

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A History of the Term “Moral Hazard”

Cited by 109 publications

References 40 publications

Negative equity companies in Europe: theory and evidence

Negative equity companies in Europe: theory and evidence

Incentive Model Based on Cooperative Relationship in Sustainable Construction Projects

¿Qué capacidades requieren las nuevas políticas de innovación y cambio estructural en Uruguay?

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