principal-cost theory, which posits that each firm's optimal governance structure minimizes the sum of principal costs, produced …. The empirical predictions produced by principal-cost theory are more accurate than those produced by any theory focused … solely on agency costs. Principal-cost theory also suggests different policy prescriptions. Rather than banning some …

relationship to size requires untangling cost and profit from decisions about risk versus expected-return because both cost and … episodes of financial distress and they also have an incentive to increase risk to exploit the cost-of-funds subsidy of … profit are functions of endogenous risk-taking. This chapter gives an overview of two general empirical approaches to …

relationship to size requires untangling cost and profit from decisions about risk versus expected return because both cost and … charters from episodes of financial distress, and they also have an incentive to increase risk to exploit the cost … profit are functions of endogenous risk-taking. This chapter gives an overview of two general empirical approaches to …

the restrictions imposed by profit maximization (cost minimization) so that estimators are inconsistent or poorly … often inconsistent with profit maximization or imply implausibly large profits. The puzzle arises because popular estimators … full-information estimator that models the cost and the revenue functions simultaneously and accounts for unobserved …