Abstract
The urge to build empires makes for fragility. Corporate empires are commonly built on debt, instead of equity. I illustrate fragility by the debt-equity ratio. A firm with a low debt-equity ratio has the shape of a pyramid, while a firm with a high debt-equity ratio has the shape of a Martini glass. Do I need to explain that a Martini glass is more likely to topple than a pyramid during an earthquake? The answer has not escaped central banks. They now administer artificial stress tests on the biggest banks to determine which ones are “too fragile.”
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Lee, L.W. (2019). Too Fragile. In: Industrial Organization. Palgrave Pivot, Cham. https://doi.org/10.1007/978-3-030-26237-2_7
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DOI: https://doi.org/10.1007/978-3-030-26237-2_7
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