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Performance Incentive Fees: An Agency Theoretic Approach

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Author Info
Starks, Laura T.
Abstract

This paper employs recent developments in agency theory to study the impact that compensation contracts have on portfolio management investment decisions in a restricted mean-variance world. Two types of incentive contracts for mutual fund managers are analyzed and compared. The results show that the contract, while not necessarily eliminating agency costs, dominates the contract in aligning the manager's interests with those of the investor.

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File URL: http://journals.cambridge.org/abstract_S0022109000012400
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Publisher Info
Article provided by Cambridge University Press in its journal Journal of Financial and Quantitative Analysis.

Volume (Year): 22 (1987)
Issue (Month): 01 (March)
Pages: 17-32
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:cup:jfinqa:v:22:y:1987:i:01:p:17-32_01

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  1. Dimitri Vayanos, 2004. "Flight to Quality, Flight to Liquidity, and the Pricing of Risk," NBER Working Papers 10327, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Athanasios Orphanides, 1996. "Compensation incentives and risk taking behavior: evidence from mutual funds," Finance and Economics Discussion Series 96-21, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  3. Connie Becker & Wayne Ferson & David Myers & Michael Schill, 1998. "Conditional Market Timing with Benchmark Investors," NBER Working Papers 6434, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Basak, Suleyman & Pavlova, Anna & Shapiro, Alex, 2005. "Offsetting the Incentives: Risk Shifting and Benefits of Benchmarking in Money Management," CEPR Discussion Papers 5006, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  5. Laura Frieder & Avanidhar Subrahmanyam, 2001. "Brand Perceptions and the Market for Common Stock," University of California at Los Angeles, Anderson Graduate School of Management 1016, Anderson Graduate School of Management, UCLA. [Downloadable!]
  6. Jennifer Huang & Clemens Sialm & Hanjiang Zhang, 2009. "Risk Shifting and Mutual Fund Performance," NBER Working Papers 14903, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Juan-Pedro Gómez & Tridib Sharma, 2003. "Portfolio Delegation under Short-selling Constraints," Economics Working Papers 695, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  8. Ching-mann Huang & Len-kuo Hu & Hsin-Hong Kang, 2005. "Compensation Design and Career Concerns of Fund Manager," Review of Quantitative Finance and Accounting, Springer, vol. 24(4), pages 379-397, June. [Downloadable!] (restricted)
  9. Judith Chevalier & Glenn Ellison, 1998. "Career Concerns of Mutual Fund Managers," NBER Working Papers 6394, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Pegaret Pichler, 2004. "Optimal Contracts for Teams of Money Managers," Econometric Society 2004 North American Winter Meetings 495, Econometric Society. [Downloadable!]
  11. Stephen Brown, 1999. "Conditions for Survival: Changing Risk and the Performance of Hedge Fund Managers and CTAs," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-077, New York University, Leonard N. Stern School of Business-. [Downloadable!]
    Other versions:
  12. Michael Brennan, 1993. "Agency and Asset Pricing," University of California at Los Angeles, Anderson Graduate School of Management 1147, Anderson Graduate School of Management, UCLA. [Downloadable!]
  13. Ping Hu & Jayant Kale & Ajay Subramanian, 2003. "Compensation, Career Concerns, and Relative Risk Choices by Mutual Fund Managers: Theory and Evidence," Levine's Bibliography 666156000000000349, UCLA Department of Economics. [Downloadable!]
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This page was last updated on 2009-11-23.

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