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Risk Management Failures
2015
Social Science Research Network
We present a theory in which deficiencies in risk management arise from a coordination failure. Firms choose privately optimal risk management regimes to be competitive in a market with shortlived trading opportunities but in aggregate can find themselves in a constrained inefficient "race to the bottom," with their best responses to time pressure exhibiting strategic complementarities reminiscent of bank runs. Comparative statics based on global games suggest that greater market access or
doi:10.2139/ssrn.2614468
fatcat:juls3f2zarb7bfs6yo73i3fsxu