The Fragility of Organization Capital

Oliver Boguth, David Newton, Mikhail Simutin

Research output: Contribution to journalArticlepeer-review

4 Scopus citations


Firms with high levels of organization capital (OK), a firm-specific production factor provided by key employees, are known to be risky and earn high stock returns. We argue that fragility of OK (i.e., its sensitivity to potential disruptions) is an independently important dimension of this risk. We proxy for fragility by the size of the top management team and show that firms with small teams outperform firms with big teams by 5% annually. The return spread increases in the level of OK and correlates with the outside options of top executives. Further supporting our interpretation, shocks to team composition from unexpected deaths of chief executive officers cause larger value losses in smaller teams.

Original languageEnglish (US)
Pages (from-to)857-887
Number of pages31
JournalJournal of Financial and Quantitative Analysis
Issue number3
StatePublished - May 1 2022

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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