The composition of risks assumed by U. S. commercial banks underwent a dramatic transformation over the years leading up to the financial crisis: between 2000 and 2006 idiosyncratic risk dropped by almost half while systematic risk doubled. These patterns, more pronounced in banks with heavy...

This article integrates strategic product market analysis with price-taking asset pricing theory. We demonstrate that a firm's market power can lead to scale-dependent and potentially infinite required returns. Scale dependency, which we relate to risk spillovers between expansionary and...

The empirical literature on franchising suggests that the proportion of risk borne by franchisees increases as the amount of risk to be shared goes up. This has been interpreted by some as evidence that franchisers use franchising as a way to quot;shedquot; risk. This paper argues against this...

Contractual arrangements involving revenue/profit sharing are often based on fairly simple, often linear, rules. In addition, in many contexts these contracts are notfinely adjusted to the particular circumstances of individual agents or markets, nor do they vary over time to the extent current...

Linking managerial incentives to payoffs to shareholders provides managers with incentives to act in the shareholders' interest and to enhance shareholder value. Such alignment, when achieved through long-term equity stakes, also imposes risks on managers and leads to excessive managerial...

Tirole (1982) is commonly interpreted as proving that bubbles are impossible with finitely many rational traders with common priors. We study a simple variation of his model in which bubbles can occur, even though traders have common priors and common knowledge that the asset has no fundamental...