Principals spread risk through loans, reinsurance, and swaps to curb agent abuse.
Evidence
Second and alternatively, principals attempt to reduce their exposure to agent abuse by spreading their risk (Heimer 1976). Banks frequently sell their consumer and corporate loans to other corporations, pension funds, and insurance companies (Sandler 1984). Insurance companies develop reinsurance arrangements whereby they resell portions of their policies to other insurers who accept part of the risk in return for a share of the premium. — Shapiro, Susan P., The Social Control of Impersonal Trust, 36
Categorization
- XREF: Connects to modern risk-transfer instruments like credit default swaps and securitization that amplified rather than solved agency problems in 2008. — connects to: Risk-spreading strategies like securitization exacerbate agency abuse rather than reducing it. — Shapiro, Susan P., The Social Control of Impersonal Trust, 38; Credit ratings can be rented, shifting risk onto investors who trust them. — Shapiro, Susan P., The Social Control of Impersonal Trust, 126
Related
- Risk-spreading strategies like securitization exacerbate agency abuse rather than reducing it. (similarity 0.89)
- The same factors enabling agency relationships create the opportunity for agent abuse. (similarity 0.79)
Broader Connections
- Risk-spreading strategies like securitization exacerbate agency abuse rather than reducing it.
#contradicts(0.92) — Shapiro, Susan P., The Social Control of Impersonal Trust, 38 - Credit ratings can be rented, shifting risk onto investors who trust them.
#exemplifies(0.80) — Shapiro, Susan P., The Social Control of Impersonal Trust, 126