The Impact Of Institutional Investors And Increasingly Sophisticated Financial Instruments On Risk And Leverage

A paper prepared by the economists of the Bank of England in 2009 shows that the entire growth of bank profits in 2007 resulted from increased leverage. A similar situation occurred in many other financial institutions and enterprises. This method of improving the results is clearly associated with an increased risk. Wages of managers depended, therefore, upon taking ever-greater risks, not necessarily from the perspective of managers, but certainly from the perspective of companies they manage.

Provided by: Munich Personal Repec Archive Topic: Innovation Date Added: Aug 2010 Format: PDF

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