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Systemic risk, coordination failures, and preparedness externalities

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decision makers that affect the likelihood of such failures are sometimes said to cause “systemic risk.”
This paper seeks to consider the externality in the choice of ex ante risk management policies by
individuals and firms, concerned with private risk, not with their contribution to systemic risk.
Design/methodology/approach – The implications for debates over fair value accounting are
considered.
Findings – One consequence is that individuals and firms become overleveraged from a social
viewpoint. The recent credit crisis exemplifies the importance of this problem. The US tax system
taxes equity more heavily than debt, and therefore exacerbates the bias toward overleveraging.
A possible solution is to reduce or eliminate taxation of corporate income and capital gains.
Preparedness externalities can also cause firms to become too transparent, and thereby subject to
financial runs.
Originality/value – The paper offers insights into systemic risk, coordination failures, and
preparedness externalities, focusing on tax and accounting policy.

Keywords Risk analysis, Taxation, Accounting policy, Economic conditions, United States of America

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Informasi Detail

Judul Seri

Journal of Financial Economic Policy

No. Panggil

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Penerbit

: Emerald Group., 2009

Deskripsi Fisik

Journal of Financial Economic Policy Vol. 1 No. 2, 2009 pp. 128-142

Bahasa

English

ISBN/ISSN

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Klasifikasi

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Tipe Isi

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Tipe Media

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Tipe Pembawa

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Edisi

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Subjek

AKUNTANSI

Info Detail Spesifik

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Pernyataan Tanggungjawab

Asmawati/Syahrial

Versi lain/terkait

Lampiran Berkas

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