Organizations that enjoy some slack are believed to make good use of it in their strategic decisions. Using panel data on firms in the U.S. film distribution industry between 1985 and 2007, this article examines how financial slack affects the volume of new product introductions, the competitive strategies for those releases, and their economic performance. Unexpectedly successful “sleeper” films are exploited as a source of exogenous financial slack in the econometric analysis. The results suggest that unexpected financial slack leads to more product introductions, less marketing support for the new products, and no improvement in performance. These findings are consistent with an attribution process in which managers attempt to replicate extraordinary success even if it is largely random, providing real-world evidence of a mechanism recently developed in theory and laboratory research.

We provide direct evidence on the impact of asymmetric information on both financing and operating activities through a study of credit evaluations of microfinance institutions (MFIs). We employ a regression discontinuity model that exploits the eligibility criteria of an evaluation subsidy offered by a non-profit consortium. Evaluations dramatically cut the cost of financing. This effect is strongest for commercial lenders and for short-term MFI-lender relationships. The impact of evaluations on the supply of finance is mixed. Evaluated MFIs lend more efficiently, extending more loans per employee. We thank Damian von Stauffenberg and MicroRate for providing the data. Natividad thanks CIBER at UCLA Anderson for financial support. We have benefited from the comments of Bruce Carlin, Matthias Kahl, Philipp Schnabl, and seminar participants at UCLA Anderson.

We propose a theoretical framework to understand the effect on a movie's eventual theatrical success of leading the box office during the opening weekend. We consider two possible channels: a positive shock to the utility from watching the movie and a greater awareness of the movie's existence. We derive a series of testable predictions, which we test on U.S. box office data. The results suggest that being #1 in sales during the opening weekend has an economically and statistically significant effect on the movie's total demand; and that the primary channel for this effect is through the greater awareness induced by being #1.

T his paper shows how interdependencies influence performance following a reduction in firm scope. We test the predictions of the theory using detailed microdata on every Peruvian fishing firm before and after a regulatory ban on mackerel fishing, finding that a reduction in the scope of activities causes the productivity of firms' legacy anchovy operations to fall sharply, before recovering in the long run. The results are most pronounced for firms with the strongest interdependencies between activities. Moreover, we find evidence that the persistence of the productivity decline is explicitly tied to a failure to adapt quickly following the ban. Consistent with our conceptual characterization, the evidence suggests that interdependencies between activities simultaneously create benefits as well as costs, but that costs are more persistent when the firm reduces its scope of activities.

The provision of subsidized credit to financial institutions is an important and frequently used policy tool of governments and central banks. To assess its effectiveness, we exploit changes in international bilateral political relationships that generate shocks to the cost of financing for microfinance institutions (MFIs). MFIs that experience politically driven reductions in total borrowing costs hire more staff and increase administrative expenses. Cheap credit leads to greater profitability for MFIs and promotes a shift toward noncommercial loans but has no effect on total overall lending. Instead, the additional resources are either directed to promoting future growth or dissipated.