This paper examines the determinants of organizational scale and scope, with applications to various industries, including financial services. We build a model in which new opportunities arise for firms, but the skills needed to exploit them effectively are unknown. Early investments in these...

In this article, we provide a novel rationale for credit ratings. The rationale that we propose is that credit ratings serve as a coordinating mechanism in situations where multiple equilibria can obtain. We show that credit ratings provide a focal point for firms and their investors, and...

Proponents of EVA and related 'shareholder value' measures intend to replace earnings and to supplement stock returns by including their own measures in managerial compensation schemes. Stern Stewart's EVA appears to be the most widely recognized measure. However, there are not very many firms...

Academics have long argued that incentive contracts for executives should be indexed to remove the influence of exogenous market factors. Little evidence has been found that firms engage in such practices, also termed 'relative performance evaluation'. We argue that firms may not gainmuch by...