This paper introduces an internal capital market into a two-factor model of multi-segment frms that features managers' empire building and informational frictionswithin the organization. Our novel theory shows that international trade imposesdiscipline on divisional managers and improves capital...

[This item is a preserved copy. To view the original, visit http://econtheory.org/] The provision of public goods under asymmetric information has most oftenbeen viewed as a mechanism design problem under the aegis of an uninformedmediator. This paper focuses on institutional contexts without...