Organization Capital and the Cross‐Section of Expected Returns

  • Author(s): ANDREA L. EISFELDT, DIMITRIS PAPANIKOLAOU
  • Published: Jul 16, 2013
  • Pages: 1365-1406
  • DOI: 10.1111/jofi.12034

ABSTRACT

Organization capital is a production factor that is embodied in the firm's key talent and has an efficiency that is firm specific. Hence, both shareholders and key talent have a claim to its cash flows. We develop a model in which the outside option of the key talent determines the share of firm cash flows that accrue to shareholders. This outside option varies systematically and renders firms with high organization capital riskier from shareholders' perspective. We find that firms with more organization capital have average returns that are 4.6% higher than firms with less organization capital.

Jump to menu

Main Navigation

Search the Site / Journal

Search Keywords

Search Tips

Members' Login

Credentials

Members' Options

Site Footer

View Mobile Version