We model the repair of damaged corporate reputations through organizational structure reform. In a rational-choice framework our model explains the effects of the emergence and growth of the professional reputation-crisis management industry. The model produces two key conclusions: (a) Although,...

The paper shows that, as owners accumulate larger stakes and hence become less risk-tolerant, their incentives to monitor management are attenuated because monitoring shifts some of the firm's risk from management to owners. This counterbalances the positive effect which more concentrated...