Fragility under joint financing: The (moral) hazards of diversification
研究了在道德风险下，企业增加高风险投资项目会削弱对安全项目的激励，即使收益独立，这种风险传染也会加剧企业脆弱性，且好消息会放大此效应。
We study the effect of investment growth on firms' incentives under moral hazard. Adding value-increasing, but risky projects to a firm's portfolio can weaken incentives for safer ones, even when returns are independent. While the firm diversifies its sources of income, this risk contamination channel can increase its fragility. Such fragility is exacerbated in the presence of news about the value of investments. Firms can mitigate these effects by selecting safer new investments at the expense of value creation. Our model thus predicts that large firms or merged firms may be riskier or less productive than smaller firms.