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Evidence On The Compensation Of Portfolio Managers

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  • Heber Farnsworth
  • Jonathan Taylor
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    Abstract

    We surveyed 396 portfolio managers about the structure of their compensation. Overall, more compensation packages are subjective/discretionary than objective/formula based. Firm success factors such as firm profitability have more effect on bonuses than do client success factors such as investment performance. Differences in the structure of compensation across firms, clients, job types, and manager characteristics reflect likely differences in the underlying contracting environments, especially differences in the difficulty of monitoring performance and exerting control. 2006 The Southern Finance Association and the Southwestern Finance Association.

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    Bibliographic Info

    Article provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.

    Volume (Year): 29 (2006)
    Issue (Month): 3 ()
    Pages: 305-324

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    Handle: RePEc:bla:jfnres:v:29:y:2006:i:3:p:305-324

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0270-2592
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    Web page: http://www.southwesternfinance.org/
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    Cited by:
    1. Tuckett, David, 2012. "Financial markets are markets in stories: Some possible advantages of using interviews to supplement existing economic data sources," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 36(8), pages 1077-1087.
    2. Lioui, Abraham & Poncet, Patrice, 2013. "Optimal benchmarking for active portfolio managers," European Journal of Operational Research, Elsevier, Elsevier, vol. 226(2), pages 268-276.
    3. Kempf, Alexander & Ruenzi, Stefan & Thiele, Tanja, 2009. "Employment risk, compensation incentives, and managerial risk taking: Evidence from the mutual fund industry," Journal of Financial Economics, Elsevier, Elsevier, vol. 92(1), pages 92-108, April.
    4. Pikulina, E.S. & Renneboog, L.D.R. & Horst, J.R. ter & Tobler, P.N., 2013. "Bonus Schemes and Trading Activity," Discussion Paper, Tilburg University, Center for Economic Research 2013-030, Tilburg University, Center for Economic Research.
    5. Gehrig, Thomas & Lütje, Torben & Menkhoff, Lukas, 2009. "Bonus Payments and Fund Managers’ Behaviour: Trans-Atlantic Evidence," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7118, C.E.P.R. Discussion Papers.
    6. Abigail S. Hornstein & James Hounsell, 2013. "Managerial Investment in Mutual Funds," Wesleyan Economics Working Papers, Wesleyan University, Department of Economics 2013-005, Wesleyan University, Department of Economics.
    7. Khorana, Ajay & Servaes, Henri & Wedge, Lei, 2007. "Portfolio manager ownership and fund performance," Journal of Financial Economics, Elsevier, Elsevier, vol. 85(1), pages 179-204, July.

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