Tomorrow’s coverage of the so-called underinvestment problem (where, in the absence of risk management, it may sometimes be “rational” to reject a positive net present value project) is based on the How Insurance Solves the Underinvestment Problem assigned reading. This reading is an unpublished appendix based on the following published (peer-reviewed) journal article:
Garven, James R. and Richard D. MacMinn, 1993, “The Underinvestment Problem, Bond Covenants and Insurance,” Journal of Risk and Insurance, Vol. 60, No. 4 (December), pp. 635-646.
The above-referenced article was recognized as the best (shorter) article published in the Journal of Risk and Insurance in the year that it was published, and according to Google Scholar, it has been cited 87 times.