IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v28y2019icp45-52.html
   My bibliography  Save this article

Explaining asset managers preference for the P&L method over RPAs when paying for research under MiFID II

Author

Listed:
  • Tata, Fidelio

Abstract

While MiFID II allows asset managers to pay for research via a dedicated client research payment account (RPA), by the end of 2017 virtually all major asset managers have decided to pay for research directly out of their own P&L. We propose an explanation for the lack of use of the RPA method, based on a simple model of free-riding behavior. We show that asset managers receive too little funds for research consumption, which reduces their ability to outperform the market. Replacing the RPA system by the P&L method leads to a better outcome for everyone.

Suggested Citation

  • Tata, Fidelio, 2019. "Explaining asset managers preference for the P&L method over RPAs when paying for research under MiFID II," Finance Research Letters, Elsevier, vol. 28(C), pages 45-52.
    • Handle: RePEc:eee:finlet:v:28:y:2019:i:c:p:45-52
    DOI: 10.1016/j.frl.2018.03.021
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612318300965
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2018.03.021?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Isaac, R Mark & Walker, James M, 1988. "Communication and Free-Riding Behavior: The Voluntary Contribution Mechanism," Economic Inquiry, Western Economic Association International, vol. 26(4), pages 585-608, October.
    2. George J. Stigler, 1974. "Free Riders and Collective Action: An Appendix to Theories of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 359-365, Autumn.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Markus C. Arnold & Eva Ponick, 2006. "Kommunikation im Groves-Mechanismus — Ergebnisse eines Laborexperiments," Schmalenbach Journal of Business Research, Springer, vol. 58(1), pages 89-120, February.
    2. Robert Roßner & Dimitrios Zikos, 2018. "The Role of Homogeneity and Heterogeneity Among Resource Users on Water Governance: Lessons Learnt from an Economic Field Experiment on Irrigation in Uzbekistan," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(03), pages 1-30, July.
    3. Aseem Kaul & Jiao Luo, 2018. "An economic case for CSR: The comparative efficiency of for‐profit firms in meeting consumer demand for social goods," Strategic Management Journal, Wiley Blackwell, vol. 39(6), pages 1650-1677, June.
    4. Andreas Löschel & Dirk Rübbelke, 2014. "On the Voluntary Provision of International Public Goods," Economica, London School of Economics and Political Science, vol. 81(322), pages 195-204, April.
    5. Kimbrough, E.O. & Vostroknutov, A., 2012. "Rules, rule-following and cooperation," Research Memorandum 053, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    6. Alberti, Federica & Mantilla, César, 2020. "Provision of noxious facilities using a market-like mechanism: A simple implementation in the lab," Working papers 35, Red Investigadores de Economía.
    7. Bruno Broseta & Enrique Fatas & Tibor Neugebauer, 2003. "Asset Markets and Equilibrium Selection in Public Goods Games with Provision Points: An Experimental Study," Economic Inquiry, Western Economic Association International, vol. 41(4), pages 574-591, October.
    8. Alain Cohn & Tobias Gesche & Michel André Maréchal, 2022. "Honesty in the Digital Age," Management Science, INFORMS, vol. 68(2), pages 827-845, February.
    9. Urs Fischbacher & Simon Gaechter, 2008. "Heterogeneous Social Preferences And The Dynamics Of Free Riding In Public Good Experiments," Discussion Papers 2008-07, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    10. Hamet SARR & Mohamed Ali BCHIR & François COCHARD & Anne ROZAN, 2021. "Is the “average Pigouvian tax” robust to the size of the group of polluters?," Review of Agricultural, Food and Environmental Studies, Springer, vol. 102(3), pages 285-295, September.
    11. Andrzej Baranski & Caleb A. Cox, 2019. "Communication in Multilateral Bargaining with Joint Production," Working Papers 20190032, New York University Abu Dhabi, Department of Social Science, revised Nov 2019.
    12. Dirk Alboth & Anat Lerner & Jonathan Shalev, 2001. "Profit Maximizing in Auctions of Public Goods," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 3(4), pages 501-525, October.
    13. Tarui, Nori & Mason, Charles F. & Polasky, Stephen & Ellis, Greg, 2008. "Cooperation in the commons with unobservable actions," Journal of Environmental Economics and Management, Elsevier, vol. 55(1), pages 37-51, January.
    14. Feltovich, Nick & Grossman, Philip J., 2015. "How does the effect of pre-play suggestions vary with group size? Experimental evidence from a threshold public-good game," European Economic Review, Elsevier, vol. 79(C), pages 263-280.
    15. Bracht, Juergen & Feltovich, Nick, 2009. "Whatever you say, your reputation precedes you: Observation and cheap talk in the trust game," Journal of Public Economics, Elsevier, vol. 93(9-10), pages 1036-1044, October.
    16. Fehr, Dietmar & Sutter, Matthias, 2019. "Gossip and the efficiency of interactions," Games and Economic Behavior, Elsevier, vol. 113(C), pages 448-460.
    17. Robert Tollison, 2012. "The economic theory of rent seeking," Public Choice, Springer, vol. 152(1), pages 73-82, July.
    18. Jordi Brandts & David J. Cooper, 2020. "Managerial Leadership, Truth-Telling, and Efficient Coordination," Working Papers 1211, Barcelona School of Economics.
    19. Fluet, Claude & Galbiati, Rpbertp, 2016. "Lois et normes : les enseignements de l'économie comportementale," L'Actualité Economique, Société Canadienne de Science Economique, vol. 92(1-2), pages 191-215, Mars-Juin.
    20. Zhang, Zhe & Zhang, Xu & Putterman, Louis, 2019. "Trust and cooperation at a confluence of worlds: An experiment in Xinjiang, China," Journal of Economic Behavior & Organization, Elsevier, vol. 161(C), pages 128-144.

    More about this item

    Keywords

    MiFID II; Free rider problem; Public good; Research payment account; Asset manager;
    All these keywords.

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:28:y:2019:i:c:p:45-52. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.