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Why Avoiding Risk Can Be Good for Managers but Bad for Shareholders
December 10, 2014 /
In a new research paper, "Playing It Safe? Managerial Preferences, Risk and Agency Conflicts," Gormley and co-author David Matsa of Northwestern University’s Kellogg School of Management look at the problems that can arise when managers avoid taking risks that could potentially harm a firm, but could also lead to the creation of shareholder value. In an interview with Knowledge@Wharton, Gormley talks about why "playing it safe" is a problem that is hard to detect, and how giving managers a bigger ownership stake in a company can lead to the kind of risk avoidance that affects shareholder value.
Full Story: http://knowledge.wharton.upenn.edu/article/avoiding-risks-is-good-for-managers-but-bad-for-shareholders/
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