Gollier, Christian; Koehl, Pierre-François; Rochet, … - Financial Institutions Center, Wharton School of Business - 1996
The authors of this paper consider the problem of a risk-averse firm with limited liability. The firm has to select the size of its investment in a risky project. We show that the optimal exposure to risk of the limited liability firm is always larger than under full liability. Moreover, there...