Limited liability in economic contracts introduces an asymmetry that is potentially fatal in the financial sphere. Owners and managers of financial companies are given a distinct incentive to expand risk-taking in anticipation of high returns (if there is a favourable pay-off), while remaining  15  See Beltratti and Stulz (2009).
iii As recently noted by Mario Draghi, “After the crisis, it was inevitable that banking sectors in advanced economies would have to deleverage, both to cover losses and to re-focus their business models. The United States ensured that this process happened quickly and early.